Although the forest fires in Central BC rage on, the clearer air across our region has provided a great deal of relief. Unfortunately, many areas of the BC Interior may be dealing with high winds and thundershowers this coming weekend, so that certainly won’t help the fire-fighting effort. North America’s first total solar eclipse in nearly 40 years will sweep across the continental USA on Monday morning. While we will only see a partial eclipse in Canada, it will be interesting to check it out. Tonight, I am taking the family to see the live performance of Mary Poppins in the Theatre Under the Stars in Stanley Park (yes, parking will be a challenge).
On my recent trip to Europe, I really noticed the stand out level of efficiency of many American companies who are doing business there. I tried to immerse myself into European life and avoid all American “chain” businesses as much as possible. However, there were a few instances when, due to time constraints and crowds, I felt I had no choice but to visit a McDonald’s or Starbucks. One afternoon while visiting Paris, we were walking down the Champs-Élysées and came across a Brazilian parade. The spectacle was incredible and we felt like we were right in the middle of Mardi Gras. It was so hot out and we were all famished, but every restaurant was packed due to crowd overflow from the parade. We spotted a McDonald’s and my resolve broke down. Inside, we found it jammed with patrons but, surprisingly, they were having no problems dealing with the amount of business coming in the door. I ordered using the touch screen as there were no tills in this location. The touch screen kiosks were exactly the same as the ones we have here and I was even able to pay using my cell phone. McDonald’s was quick and efficient and we were on our way in no time. On another occasion, while in Florence, I wanted to have a beer and relax before getting on our next train and again every place was mobbed. Once again, McDonald’s was right there and operating like a well-oiled machine. And they served beer! Coincidently, I bumped into our waitress from the Michelin Star restaurant in Tuscany where we ate two nights earlier. She happened to be in there getting her lunch. For you trivia buffs, the Michelin Star ratings were started by the Michelin tire company as a way to get people to drive around so that they would wear out their tires faster.
also went into Orange, the big French cell phone provider, to buy a SIM card so I could use my cell phone while in Europe. They appeared to be trying to copy the Apple store format and although the service was fine it was nothing like the efficiency of an Apple store. In Rome, I went into a Vodafone store and found the same thing. Interestingly, when we checked in with customer service at Vodafone, we had to state whether we were a tourist or a local, after which we received a number (for the queue). I selected “tourist” and received a ticket with number 32. My daughter, however, selected “local” and received a ticket with number 2. We were not impressed.
American companies such as Disney, Apple, McDonald’s, Netflix, Nike and Starbucks (now opening in Italy) continue to flourish and expand all over the world. Many other companies such as Home Depot, Best Buy, Mattel, and Walmart all failed and left. From an investment point of view, it’s relevant to note which companies are thriving there. In defense of many European establishments, the pace at which they operate seems consistent with the more relaxed energy in Europe. In today’s busy world, I think we can all benefit from taking things a little slower.
The clear leader in bringing in revenue was the Vatican City. They were highly efficient at moving the mobs of tourists through the various “must-sees” and managed to remove many Euros from my wallet. Both the décor and all the history were astounding. By far, my favorite part of the Vatican was St Peter’s Basilica. Breathtaking.
Interesting tidbits:
Nokia is betting the “bothie” will replace the selfie. Its new Android phone can take photos with the front and rear cameras simultaneously.
Hyundai announced a new long-range hydrogen powered SUV. The Seoul-based automaker plans to launch a second generation hydrogen fuel cell vehicle with a 580 km range early next year. Fuel cell cars are emissions free and can be refueled in a few minutes. By 2020, South Korea aims to have 110,000 of them out on the road.
London’s Big Ben will go silent for the next four years. The iconic Parliament clock tower – said to be the most photographed site in the UK – needs a major renovation.
An exceptional U.S. earnings season despite subdued share price reaction
With more than 450 companies in the S&P 500 having reported second-quarter results, 78% have surpassed consensus profit estimates and 68% have beaten revenues forecasts, the best positive surprise rate in more than a decade, according to Bloomberg. Profits soared almost 10% on average on the back of 5.5% sales growth, bolstered in part by particularly robust momentum for companies with international exposure. Multinationals that generate more than half of revenues outside the U.S. delivered a blended earnings growth rate of 14%, thanks in large part to stronger growth in overseas economies and a weaker greenback, compared to 8.5% for firms that generate more than 50% of sales inside the U.S. Unlike the past, however, a Bank of America research report observed that U.S. companies have not been rewarded with immediate share price gains for their remarkable second-quarter earnings performance, an anomaly that could be attributed to elevated valuations heading into the earnings season which had already priced in a robust growth outcome.
NAFTA 2.0 negotiations commence
Delegates from Canada, Mexico and the U.S. kicked off their first round of negotiations on Wednesday to modernize the 23-year old NAFTA agreement. With seven rounds of talks scheduled between now and early next year, market participants should prepare for a regular dose of trade-related headlines in the months ahead. A successful overhaul of the decades-old trade deal would further boost the flourishing trade relationship between the three countries. Since NAFTA was signed in 1994, trilateral trade of goods and services between three nations has tripled to $1.2 trillion, according to Bloomberg. Some possible priorities for Canada for the upcoming talks include the softwood lumber dispute, energy trade, e-commerce access, and the dairy industry. Markets will also be monitoring the degree to which U.S. negotiators will steer talks in a more protectionist direction
Oil prices remain stuck in a range
Spot WTI and Brent crude oil have shed around 3% this week, as lingering skepticism over the ability of OPEC’s production cuts to alleviate a global supply glut has overshadowed recent data showing declining U.S. oil stockpiles. In an interview on Monday, a senior International Energy Agency official cautioned that “rebalancing is a stubborn process” and that if OPEC wishes to achieve its objective of reducing global oil inventories down to the five-year average, it is going to have to “dig in for the long haul.”
Federal Reserve minutes knock bond yields and U.S. dollar lower
Wednesday’s minutes from the Fed’s meeting in July revealed a robust debate amongst policymakers regarding the U.S. inflation outlook, as “several” members cautioned the risks could be tilted to the downside while other officials warned that waiting too long to normalize rates “could result in an overshooting” of inflation. The apparent division within the Fed over the recent string of timid inflation data fueled skepticism about the central bank’s plan to raise short-term rates for a third time before yearend. Both U.S. Treasury yields and the dollar fell post the release of the minutes, as markets currently see just a 40% chance of another rate hike through the end of the year, according to Bloomberg. Fed officials also reiterated that an announcement on balance sheet reduction is imminent. Fiscal policy represents a wildcard that could further complicate the Fed’s plan to continue the course of monetary policy normalization, as expectations of any form of fiscal stimulus have deflated further after the recent Trump controversy. Two of Trump’s business advisory groups have disbanded after several CEOs resigned over his response to the violent rally in Charlottesville last weekend.
Michael Wilkie, BBA, FMA, CIM l Vice President, Portfolio Manager, Westside Wealth Management Group I RBC Wealth Management l RBC Dominion Securities Inc. I 604-665-8480 I 1-800-641-5665 I 604-266-1147 F. I 2052 West 41st Avenue, 3rd Floor, Vancouver, BC V6M 1Y8 l www.michaelwilkie.ca
Associates: Clare Singh l Direct 604-665-0697 l clare.singh@rbc.com
Michelle Lee l Direct 604-713-2742 l michelle.lee@rbc.com
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