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Take Five: The Year of the Bear! World markets themes for the week ahead

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(Reuters) – Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 27, 2018. REUTERS/Eduardo Munoz

1/BEAR HUGS

After swallowing markets from Germany to China, the bears reached U.S. shores in December.

Markets there are fighting back but the outlook is not great. For one, growing numbers of global indices have notched up the 20 percent peak-to-trough drop denoting a bear market. U.S. stocks, which seemed invincible until mid-year, have posted the worst December performance since the Great Depression. Second, the world economic outlook is steadily darkening and upcoming PMI data should confirm that.

Sure, the U.S. economy is still expanding nicely. But when high-growth, investor-darling tech stocks fall prey, it shows optimism about growth is fizzling. And segments such as the Russell 2000 small-cap benchmark are stuck deep in the bears’ lair. Small firms often carry higher debt loads than larger peers so falling share prices highlight credit risks.

In Europe, Germany’s DAX fell to the bears in early December and the euro zone bank and auto sectors are down a whopping 40 percent and 36 percent respectively from this year’s peaks. This week, the leading pan-European equity index confirmed it too had entered bear territory, following Wall Street’s Christmas Eve shakeout.

 – How bears are taking over world stock markets

After Fed selloff, is a U.S. bear market next?

China’s factory activity seen shrinking for first time since 2016

2/ PART OF THE JOB

U.S. President Donald Trump had several things going in his favor as he headed into 2018, and the two he most frequently trumpeted were the roaring stock market and booming jobs market. As we leave the year, the picture has changed somewhat, with U.S. stocks enduring their worst month since the financial crisis. But … he still has that strong jobs market. December’s non-farm payrolls data is due on Friday (it will be reported despite the government shutdown) and the 178,000 new jobs estimated to have been created will push total U.S. employment over the 150 million mark for the first time ever.

And as employment expansions go, this one is starting to rival some of the biggest in the past 40 years or so. Since hitting a post-crisis low in February 2010, more than 20 million jobs have been created. Under Trump’s watch, more than 4 million have been added. Assuming this pace is maintained, the current run will, by this time next year, surpass the 21.1 million jobs created between December 1982 and June 1990 under the Ronald Reagan and George H. W. Bush administrations.

It will still take some time to catch up with the 1990s, however. Between May 1991 and February 2001, more than 24.5 million jobs were created, most of that under Bill Clinton’s presidency. 

TAKE A LOOK BACK: U.S. job growth slows in November, monthly wage gains modest

3/A YEN FOR SAFETY

As 2018 fades, Japanese policymakers’ hearts must be sinking. The yen has zoomed to eight-month highs versus the dollar, stocks sank into bear territory and 10-year bond yields sank below zero for the first time since Sept 2017.

All the data, from price growth to industrial output and retail sales, shows disinflationary clouds gathering — yet again. By all accounts, Japanese funds are retreating from U.S. equity and bond investments, driven out by prohibitive hedging costs. That, along with an inflow of safety-seeking foreign cash, could lift the yen further. So any dreams the BOJ might harbor of ending stimulus are receding further into the future.

Here’s a thought though. Could the yen’s safe-haven status come into question? After all, Japan’s export-focused economy is vulnerable to a trade war, and an upcoming sales tax hike rekindles memories of 2014, when a similar measure hurt the economy. And notwithstanding dovish BOJ signals, officials privately acknowledge the demerits of prolonged easing, notably the hit to financial institutions from negative interest rates.

 – Japan factory output falls, sales slow as risks to economy rise

Japan bond yields fall deeper into negative as domestic, foreign money rushes in

Japan’s cabinet approves record $900 bln budget, aims to soften sales tax blow

4/ SENTENDO L’AMORE

Investors are back in love with Italy, where a budget deal with the EU has put 10-year bond yields on track for their biggest monthly fall since July 2015. They affirmed their love at this year’s last bond auction, agreeing to lend 10-year cash to the government at 2.70 percent — in November they held out for 3.24 percent.

But Italy will test the relationship again next month, when it sells 27 billion euros’ worth of new bonds.

January will be Italy’s heaviest month for bond sales in 2019. Sales are typically heavy at the start of a year, but the difference this time is that the European Central Bank will not be buying. After ending its asset purchase program, it will reinvest the proceeds of maturing debt but has allocated a smaller share of the pie to Rome next year.

In total next year, Italy hopes to sell bonds worth 250-260 billion euros. So will private creditors step into the breach? Perhaps not — local retail investors gave the cold shoulder to a specially targeted bond last month. With the ECB backstop fading, a weak economy and still-high political risk, Italy may find it still needs to woo its investors if it is to stay afloat next year.

Italy budget deal pushes bond auction yields back to pre-selloff levels

Italy needs to woo private bond buyers as ECB bows out

Italy’s bond market cheers budget deal with EU

5/ DOLLAR DARLING

As bears maul equities, where does one hide? The answer seemingly is: the dollar. Bank of America Merrill Lynch’s monthly investor survey showed the greenback regaining the “most crowded trade” crown, snatching it back from the FAANG/BAT tech stocks group. The dollar dash is unsurprising — it’s liquid, U.S. yields are high and the U.S. economy is growing faster than other developed countries.

A word of caution though. Investors following the “most crowded trade” bandwagon have fallen flat on their faces in recent years. They went into 2017 loaded up with dollars but the greenback fell relentlessly after that, ending the year with a near-10 percent loss.

In December 2017, the most crowded trade, according to the BAML survey, was Bitcoin — a 70 percent rout ensued in 2018. We can rule out a fall of that kind for the dollar. But the U.S. yield curve suggests an economic slowdown is ahead, if not recession. So notwithstanding the robust labor market, the Fed may struggle to raise interest rates much more. An investor exodus from U.S. stocks and bonds would not be good news for the dollar.

King Dollar’s reign faces challenges in 2019

Investors gloomiest in a decade about world economy – BAML

Fed still the only hiker in town, but dollar refuses to play ball: McGeever

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 27, 2018. REUTERS/Staff

 (Reporting by Dan Burns in New York and Vidya Ranganathan in Singapore; Josephine Mason, Helen Reid, Abhinav Ramnarayan, Dhara Ranasinghe, Ritvik Carvalho in London; Compiled by Sujata Rao; Editing by Catherine Evans)

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Ottawa education workers still teaching special-ed students at schools want safety checks

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Some Ottawa educators say they are concerned about the safety of classrooms that remain open in schools for special-education students.

Ontario elementary and secondary students have been sent home to study virtually because of the dangers posed by rising rates of COVID-19. However, special-education classes are still operating at many bricks-and-mortar schools.

The special-education classes include students with physical and developmental disabilities, autism and behaviour problems. Some don’t wear masks and require close physical care.

Two unions representing teachers and educational assistants at the Ottawa-Carleton District School Board have sent letters to Ottawa Public Health expressing their concerns.

It’s urgent that public health officials inspect classrooms to assess the safety of the special-ed classes, said a letter from the Ottawa branch of the Ontario Secondary School Teachers’ Federation, which also represents the educational assistants who work with special-needs children.

“In the absence of reasons based on medical evidence to keep specialized systems classes open, we are unsure as to the safety of staff and students in these programs,” said the letter signed by president Stephanie Kirkey and other union executives.

The letter said staff agreed that students in specialized classes had difficulty with remote education and benefited most from in-person instruction.

“Our members care deeply about the students they work with and are not only concerned about their own health and safety, but also about that of their students, as they are often unable to abide by COVID safety protocols that include masking, physical distancing and hand hygiene, thus making it more likely that they could transmit the virus to one another,” the letter said.

The Ottawa-Carleton District School Board has 1,286 elementary and secondary students in special-education classes attending in person at 87 schools, said spokesperson Darcy Knoll.

While final numbers were not available, Knoll said the board believed a large number of the special-education students were back in class on Friday at schools.

In-person classes for other elementary and secondary students are scheduled to resume Jan. 25.

The school boards provide PPE for educators in special-education classes as required, including surgical masks, face shields, gloves and gowns.

Several educators interviewed said they don’t understand why it has been deemed unsafe for students in mainstream classes to attend class, but not special-ed students.

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Ottawa sets record of 210 new COVID-19 cases following lag in data reporting

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Ottawa has now broken its daily record for new COVID-19 cases twice in 2021, with 210 new cases added on Friday amid a lag in data reports from earlier in the week.

The nation’s capital has now seen 10,960 cases of the novel coronavirus.

Ottawa Public Health’s COVID-19 dashboard reports 977 active cases of the virus in Ottawa, a jump of more than 100 over Thursday’s figures.

One additional person has died in relation to COVID-19 in Ottawa, raising the city’s death toll in the pandemic to 395.

The record-setting case count comes a day after Ottawa reported a relatively low increase of 68 cases. Ontario’s COVID-19 system had meanwhile reported 164 new cases on Thursday.

OPH said Thursday that due to a large number of case reports coming in late Wednesday, the local system did not account for a large portion of cases. The health unit said it expects the discrepancy to be filled in the subsequent days.

Taken together, Thursday and Friday’s reports add 278 cases to Ottawa’s total, a daily average of 139 cases.

The new single-day record surpasses a benchmark set this past Sunday, when the city recorded 184 new cases.

Ontario also reported a new record of 4,249 cases on Friday, with roughly 450 of those cases added due to a lag in reporting in Toronto.

The number of people hospitalized with COVID-19 also continues to climb in Ottawa. OPH’s dashboard shows there are currently 24 people in hospital with COVID-19, seven of whom are in the intensive care unit.

Three new coronavirus outbreaks were added to OPH’s dashboard on Friday. One outbreak affects a local shelter where one resident has tested positive for the virus, while the other two are traced to workplaces and private settings in the community.

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Ottawa family dealing with mould issue in apartment grateful for support

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OTTAWA — An Ottawa family, who has been dealing with mould in their south Ottawa apartment, is grateful for the support they have received from the community.

“I would like to say big very mighty, big thank you to everyone,” says Nofisat Adeniyi.

Adeniyi lives with her three sons in a South Keys apartment. Her son Desmond turned to social media on Sunday to seek help for the family, saying they’ve been dealing with mould in their unit and it has taken too long to fix.

“I see my mom go through a struggle everyday; with three kids, it’s not easy,” says 16-year-old Desmond Adeniyi.

He setup a GoFundMe page to help the family raise money to move out. After gaining online attention and the story, which originally aired CTV News Ottawa on Tuesday, they have been able to raise over $30,000.

“Yes! I was surprised, a big surprise!” says Nofisat Adeniyi, “We are free from the mess that we’ve been going through.”

The family was so touched, they decided to pay it forward and donated $5,000 to another family in need, “A lady my son told me about,” says Nofisat Adeniyi.

The recipient wants to remain anonymous, but when she found out from Adeniyi, “She was crying, she has three kids; I remember when I was, I can feel what she’s feeling – because I was once in those shoes.”

CTV News Ottawa did reach out to the property management company for an update on the mould. In a statement on Wednesday, a spokesperson for COGIR Realty wrote:

“We respect the privacy of our residents and are unable to disclose any specific information regarding any of our residents. We can, however, let you know that we are working with the residents and are making every effort to resolve this matter as soon as possible,” said Cogir Real Estate

The giving did not stop at just cash donations. “When I saw the segment, the thing that struck me the most was how easily the situation can be resolved,” says mould removal expert Charlie Leduc with Mold Busters in Ottawa.

Leduc is not involved in the case, but appeared in the original story, and after seeing the mould on TV wanted to help.

“This isn’t something that we typically do, but given the circumstance and given the fact that this has gone on way too long, our company is willing to go in and do this work for free,” said Leduc.

The Adeniyi family may now have some options, and are grateful to the community for the support.

“Yes, It’s great news — you can see me smiling,” says Nofisat.

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