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China trade shock hits global stocks, commodities

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LONDON (Reuters) – Global stock markets and commodities took a hit on Monday after a shock contraction in Chinese trade pointed to deepening cracks in the world’s second-largest economy and sparked fears of a sharper slowdown in global growth.

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

Data from China showed imports fell 7.6 percent year-on-year in December while analysts had predicted a 5 percent rise. Exports dropped 4.4 percent, confounding expectations for a 3 percent gain.

For an interactive version of the following chart, click here tmsnrt.rs/2SRopIf.

The data reinforced fears U.S. tariffs on Chinese goods were starting to hit China’s cooling economy, while softening demand has been felt around the world with sales of goods ranging from iPhones to automobiles slowing, prompting profit warnings from Apple among others.

Adding to the gloom were weak industrial output numbers from the euro zone, which posted their largest fall in nearly three years.

The index of Europe’s leading 300 shares .FTEU3 fell 0.9 percent by noon in London. Germany’s DAX .GDAXI and France’s CAC .FCHI were down over half a percent and 0.9 percent respectively, with shares in European luxury goods companies and the automotive sector suffering some of the biggest declines.

The falls in Europe followed hefty declines in Asia where MSCI’s broadest index of Asia-Pacific ex-Japan shares lost around 1 percent from Friday’s 1-1/2 month high – its biggest single-day percentage drop since Jan. 2. Chinese .CSI300 and Hong Kong shares .HIS suffered the worst hits.

“December’s (China) trade data were soft, but the data for the preceding months were surprisingly strong and show exports to the US growing at a decent pace, which may reflect producers trying to front-run any future escalation in tariffs,” wrote Neil Shearing, group chief economist at Capital Economics in a note to clients.

U.S. futures showed no let-up on the horizon, with Nasdaq e-mini futures NQc1 pointing to falls over 1 percent for tech stocks while industrials YMc1 looked set to open 0.9 percent softer.

COMMODITIES SUFFER

The prospect of slowing global growth also roiled commodity markets, with oil prices slipping over 1 percent. Industrial metals copper CMCU3 and aluminum lost ground in London and Shanghai.

Safe-haven trades benefited from the equity pullback with U.S. 10-year Treasury yields falling to as low as 2.6690 percent – their lowest level in a week – while gold prices gained.

The world’s two largest economies have been in talks for months to try and resolve their bitter trade war, with no signs of substantial progress.

Some analysts expect China’s latest data to provide impetus to Beijing to resolve the trade dispute with Washington.

Though Citi analysts said even with the rising probability for both sides to reach an agreement, the tariff and trade disruption appears to have already rippled through the global economy.

“Regional trade growth appears to have slowed substantially after front-loading effect diminished,” they said.

In light of the trade dispute, China’s policymakers have already pledged to step up support this year, following a raft of measures in 2018 including fast tracking infrastructure projects and cuts in banks’ reserve requirements and taxes.

In currency markets, the yuan gave up some recent gains in both onshore CNY= and offshore CNH= trading. The Chinese currency had recorded its best week in more than a decade last week.

However, this could change, said Tim Graf, head of macro strategy EMEA at State Street.

“The weakness in the Chinese data is calling into question the recent strength of the renminbi,” said Graf. “The downside for dollar/Chinese yuan is limited and that has implications for the euro and the Aussie dollar.”

The dollar index as measured against a basket of currencies nudged 0.1 percent lower to 95.558. The Australian dollar AUD=D3 and New Zealand dollar NZD=d3 – both gauges of global risk appetite – were both last down 0.3 percent.

The euro was flat at $1.14710 EUR=.

Britain’s pound GBP=D3 hit a seven-week high as Prime Minister Theresa May made last-ditch efforts to garner lawmakers’ support for her Brexit divorce deal, which looks almost certain to fail when it is put to a vote on Tuesday.

FILE PHOTO: Containers and trucks are seen on a snowy day at an automated container terminal in Qingdao port, Shandong province, China December 10, 2018. REUTERS/Stringer

For the U.S. trading day, banks will be in sharp focus as they kick off the earnings season. Quarterly results from Citigroup (C.N) are due on Monday followed by JPMorgan Chase (JPM.N), Wells Fargo (WFC.N), Goldman Sachs (GS.N) and Morgan Stanley (MS.N) later this week.

Expectations are downbeat with profits for U.S. companies forecast to rise 6.4 percent, down from an Oct. 1 estimate of 10.2 percent and a big drop from 2018’s tax cut-fuelled gain of more than 20 percent.

Investor attention was also on the U.S. government shutdown, in its 24th day with no resolution in sight.

Reporting by Karin Strohecker, additional reporting by Swati Pandey in Sydney and Dhara Ranasinghe in London; Editing by Susan Fenton and John Stonestreet

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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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