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Stock markets fall into bear market territory after Mnuchin and Trump stoke worries

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Stock markets sold off on Monday after U.S. Treasury Secretary Steven Mnuchin called the heads of six major U.S. banks Sunday in an apparent attempt to reassure jittery financial markets — but ended up only stoking investor fears.

In thin trading on Christmas Eve, the Dow Jones Industrial Average lost 653 points, or almost three per cent, to close below the 22,000 level for the first time in 15 months. That’s more than 5,000 points below where it was less than three months ago.

The broader S&P 500 was down more than two per cent at 2,351, while the technology-focused Nasdaq was also little over two per cent lower at 6,192. All three have lost 20 per cent since their peaks, which means all three are officially in bear markets.

This is a disaster for the Fed, a disaster for the president and a disaster for the economy.– Peter Conti-Brown, Wharton School

Stock markets closed at 1 p.m. ET Monday to mark Christmas Eve. Monday’s trading action was the worst on a Christmas Eve for all three U.S. indexes ever.

Markets have had their worst month in a decade as investors worry about growth prospects in the midst of an escalating global trade war. The gloom prompted Mnuchin to reach out to the chief executives of major U.S. banks to confirm they have ample money to finance all their normal operations — even though there haven’t been any serious liquidity concerns rattling the market.

The move was meant to soothe investor fears, but seems to have had the opposite effect.

“Reports of Steve Mnuchin meeting with decision-makers will not provide much Christmas cheer,” said Chris Beauchamp, chief market analyst at IG.

“Mnuchin is most likely worried about his job, but everyone else will draw the conclusion that there is perhaps much more to worry about.”

A cracked Christmas ornament with the New York Stock Exchange logo hangs from the exchange’s Christmas tree. U.S. stocks are on track for their worst month in a decade. (Mike Segar/Reuters)

“Mnuchin attempted some damage control,” Win Thin, global head of currency strategy at Brown Brothers Harriman, said in a note, adding that the move could backfire.

“Yes, markets have been worried about recession, [but] until this weekend, however, markets were not that concerned about liquidity or clearance issues. And with markets on edge, the last thing they needed was another issue to worry about,” Thin said.

The U.S. central bank, the Federal Reserve, hiked its key interest rate this month, and gave every indication that it plans to do so two more times. That also hasn’t helped stocks, as higher rates make it more expensive to borrow to invest.

Mark Grant, chief global strategist of B. Riley FBR Inc., blamed the Fed, “as they raise rates at exactly the same time that they point out that the economy is shrinking.

“In my opinion, they have made a tremendous error in judgment. They are paying no attention, at all, to our declining economic conditions, as they create liquidity issues. Absolute folly, in my estimation.”

U.S President Donald Trump seemed to agree. He has saidmore than once he would rather see rates stay low to encourage a stronger economy, ignoring the long established principle that the Federal Reserve sets it monetary policy independent of any political interference.

The president seemed to blame the Fed for the sell off on Monday, telling followers in a tweet that central bankers “don’t have a feel for the market.”

“He is seeking open warfare on Christmas Eve,” said Peter Conti-Brown, a financial historian at the Wharton School of Business at the University of Pennsylvania.

“We’ve never seen anything like this full-blown and full-frontal assault. This is a disaster for the Fed, a disaster for the president and a disaster for the economy.”

It’s not just stocks that have taken a beating recently. Oil fell to $43.96 US a barrel on Monday, off by almost $2. After briefly topping $75 a barrel in October, the U.S. oil benchmark West Texas Intermediate has slumped steadily lower on growth concerns.

The gloom in oil has been bad news for the TSX, too, as the TSX slumped to its lowest level in more than two years to close at 13,799 on Monday, off by 135 points or almost one per cent.

That’s the lowest Canada’s benchmark stock index has traded since the summer of 2016, having lost about 15 per cent of its value this year.

The selloff wasn’t limited to North America. France’s CAC 40 was down 1.5 per cent at 4,626.39, while the FTSE 100 index of leading British shares fell 0.5 per cent to 6,685.99. Germany’s DAX was closed. 

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Canadian Tire and NuPort Robotics to commercialize Canada’s first automated heavy duty trucks

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Canadian Tire Corporation and Toronto based start-up NuPort Robotics, Canada’s first autonomous trucking company, are partnering with the Ontario government to invest $3 million to undertake an automated heavy duty trucking project to test a “first-of-its-kind-in-the-world” technology. 

The breakthrough technology provides a transportation solution for the middle mile, the short-haul shuttle runs that semi-tractor trailers make between distribution centres, warehouses and terminals each day.

It is designed to enable next-generation automated trucks that are more fuel efficient, safer to operate, and provide an enhanced driver experience.

Backed by $1 million in support from the Ontario government through Ontario’s Autonomous Vehicle Innovation Network and matched by $1 million investments from Canadian Tire and NuPort Robotics, respectively, the two-year project is applying proprietary, artificial intelligence technology from NuPort Robotics to retrofit two conventional semi-tractor trailers – which will always be attended by a driver – with high-tech sensors and controls, a touchscreen navigation system, and other advanced features such as obstacle and collision avoidance.

Caroline Mulroney, Minister of Transportation, says: “Ontario is proud to be a global leader in automated and connected vehicle technology and this innovative project is an exciting milestone toward automated vehicle tech in the trucking industry.

“Ontarians rely on goods being delivered by trucks across the province every day and projects like this are demonstrating the ways that automated truck technology could help businesses meet delivery demands more efficiently while supporting a strong supply chain in Ontario.”

Vic Fedeli, Ontario Minister of Economic Development, Job Creation and Trade, says: “This project applies unique and made-in-Ontario Artificial Intelligence technology that offers increased safety and efficiency, with a reduced carbon footprint, to the goods supply chains on which we all rely.

“This is the latest example of how Ontario’s Autonomous Vehicle Innovation Network acts as a catalyst, fostering partnerships between ambitious technology start-ups and industry to develop and commercialize next generation transportation technologies that strengthen our economy and benefit society.”

Raghavender Sahdev, CEO of NuPort Robotics, says: “The trucks are currently transporting goods between a Canadian Tire distribution centre in the Greater Toronto Area and nearby rail terminals within a 12.5 mile radius, and early results are promising.

“The aim of the project is to develop a system that incorporates an autopilot feature for conventional trucks with a driver, leading to the most efficient way to drive and increase safety.

“The sensors work as a ‘safety cocoon’ to cover blind spots and prevent accidents and the end result is peak fuel efficiency, meaning lower carbon emissions, and peak driving performance for an overall more optimal transportation experience.”

NuPort Robotic’s approach to autonomous trucking is unique in the industry because it focuses only on solving the middle mile challenge, using a known set of predetermined trucking routes that are repetitive and high frequency as opposed to general highway driving.

Ultimately, when implemented on fixed routes in the future, Canadian Tire will benefit from faster commercial deployments and improvements in supply chain sustainability.

Gary Fast, vice-president of transportation, Canadian Tire, says: “Canadian Tire embraces innovation and is always testing new technologies to improve our operational efficiency and safety.

“As proud Canadian companies, the safety of all stakeholders, including drivers, employees, customers, and public will be the top priority as we work together towards deployment of this technology.”

Cari Covent, vice president of intelligent automation, Canadian Tire, says: “Over the last three years, Canadian Tire has made a significant effort to solve complex business problems by using the Canadian start-up Artificial Intelligence ecosystem, and NuPort Robotics exemplifies what we look for in a start-up with a focus on innovation, automation and artificial intelligence.”

Sahdev says: “As NuPort Robotics continues to develop new technologies to overcome middle mile supply chain problems and advance autonomous trucking, I am extremely grateful for the support of the Ontario Government through AVIN and the Ontario Centre of Innovation.

“With their continued support, we are striving to position Canada as the leader in autonomous transportation.”

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Constellation Software is money in the bank, this fund manager says

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If you’re looking for a long-term hold in Canadian tech then Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU) should definitely be on your radar. So says Jason Del Vicario of Hillside Wealth Management who likes not only Constellation but its recent spin-off Topicus (Topicus Stock Quote, Chart, News, Analysts, Financials TSXV:TOI) which Del Vicario says could do even better than CSU over the next ten years.

Software consolidator Constellation has been running on the same game plan for years, buying small vertical market software companies providing so-called mission critical software solutions globally. Over the years CSU has completed over 500 such acquisitions, buying the top names in their respective niche verticals and then using its clout and breadth to grow the business and expand into new markets. The resulting cash flow is then plowed back into more acquisitions and the cycle repeats.

The strategy has worked wonders for Constellation, which has grown its revenue from $631 million in 2010 to almost $4 billion for 2020 while taking earnings from $4.12 per share in 2010 to $20.59 per share this past year.

Shareholders were given a special treat last month when Constellation spun out recently acquired Topicus, giving CSU owners about 1.9 Topicus shares for every Constellation share as a dividend-in-kind. Constellation bought Netherlands-based software company Total Specific Solutions BV (or TSS) in 2013 and that subsidiary recently acquired Topicus BV, a Dutch information service company focusing on sectors such as healthcare, education and finance.

Topicus was singled out by Constellation founder Mark Leonard for its ability to grow without using outside shareholder funding. Leonard said the spin-out was part of the intention since a purchase agreement was struck last year.

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Nuvei wins price target raise from National Bank

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Strong quarterly results and an even brighter outlook for 2021 are reasons to celebrate for Canadian payments company Nuvei (Nuvei Stock Quote, Chart, News, Analysts, Financials TSX:NVEI), according to National Bank Financial analyst Richard Tse. In an update to clients on Wednesday, Tse left his rating unchanged at “Outperform” while raising his price target from C$85.00 to C$100.00.

Montreal-headquartered Nuvei is a provider of payment technology solutions to merchants and partners around the world, with a platform geared for high-growth mobile commerce and e-commerce markets. Nuvei’s solutions include a fully integrated payments engine with global processing capabilities, a turnkey checkout solution and a suite of data-driven business intelligence and risk management tools and services.

The company released its fourth quarter and full year 2020 financials on Wednesday, showing Q4 revenue of $115.9 million, up 46 per cent year-over-year, and adjusted EBITDA of $51.3 million, up 61 per cent year-over-year. Total dollar value of transactions processed by merchants (‘total volume’) with Nuvei rose by 53 per cent to $13.9 billion. (All figures in US dollars except where noted otherwise.)

The 2020 year featured revenue up 53 per cent to $375.0 million and adjusted EBITDA up 87 per cent to $163.0 million, with total volume rising a full 76 per cent year-over-year to $43.2 billion.

“Our performance continues to be driven by strong momentum in the high-growth verticals we serve, as well as by our customizable, scalable and feature-rich technology platform which provides one of the industry’s most complete payment technology solutions going well beyond merchant acquiring,” said Philip Fayer, chairman and CEO, in a press release.

The company said the fourth quarter represented the strongest growth yet experienced by Nuvei, driven by wallet share expansion from current merchants along with accelerated uptake of new merchants. New e-commerce business almost tripled compared to a year earlier, Nuvei said, while the company expanded its connectivity coverage over the quarter, introduced new product innovations on its platform and continued to execute on M&A.

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