Today’s Daily Brief: Canada Lights Up, Europe Knuckles Down

Today’s Daily Brief: Canada Lights Up, Europe Knuckles Down

about 3 years ago3 mins

Tilray and Aphria are remarkably chilled out about the post-pandemic future: the Canadian cannabis companies announced a merger on Wednesday, creating the world’s biggest cannabis producer by sales 🍁

What does this mean?

The newly merged company will boast 17% of the Canadian cannabis market, but Tilray and Aphria aren’t stopping there: they’re keen to break into the potentially massive US market too. And they might’ve already made the move a lot easier for themselves. Tilray, for one, is headquartered in Canada but registered as a US firm, and it became the first cannabis company to debut on one of the key American stock markets back in 2018 📈 Aphria’s recent acquisition of US brewer SweetWater, meanwhile, should give them an invaluable distribution point south of the Canadian border. Far out.

Marijuana producers Aphria and Tilray are merging after taking their shareholders on a roller-coaster ride the last couple of years

Why should I care?

The bigger picture: Up in smoke.

Investors seemed to dig the prospect of two of the biggest names in the cannabis industry joining forces, with Aphria and Tilray’s stocks initially jumping 6% and 27% respectively. That could have something to do with the timing: the US took one step closer toward becoming the world’s biggest cannabis market last month, with various states voting to relax their rules and the election of a more weed-friendly president-elect 💨 But investors might want to chill, man: an opposition-controlled US Senate is unlikely to sign off on full legalization even if the president-elect were on board with it himself – which he’s not.

Global spending on legal recreational cannabis is projected to surge

For markets: Drink it in.

At least Tilray and Aphria have something to fall back on if the US market takes a few more years to open up 🍺 Aphria’s ownership of SweetWater and Tilray’s partnership with beer brewer AB InBev puts them at the forefront of the cannabis-infused drinks market, which stands to benefit from the trend away from alcohol and sugary drinks in favor of healthier, potentially more therapeutic options.

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Europe Knuckles Down

PMIs image

Fresh December economic activity data out on Wednesday showed the eurozone’s had more on its plate than expected recently, but at least it seems to be rising to the challenge 🇪🇺

What does this mean?

Quick reminder: business managers are asked to complete surveys on how busy they’ve been every month – or in this case, leading up to Christmas – to give an indication of economic activity as a whole. And so far in December, a growing manufacturing sector has been more than offset by a shrinking services industry (think everything from restaurants to accountants) ⚖️ So while activity in the eurozone is declining slightly overall, it’s falling by less than economists thought it would. That stronger end to the year might go some way to helping the bloc’s economy grow by more – or, uh, shrink by less – than the 2% drop the European Central Bank (ECB) is forecasting.

Manufacturing and service sector output

Why should I care?

For markets: Friendly competition.

The ECB said earlier this week that the region’s commercial banks – like Santander and Unicredit – will be allowed to start paying limited dividends again next year. It admittedly might not have had much choice after the Bank of England gave its banks the go-ahead last week, which may encourage investors – whose dividends are notoriously important to them – to yank their cash out of eurozone banks in favor of British ones 🏦 But whatever the central bank’s motivation, its decision could lure investors back toward banks’ cheap-looking “value” stocks and away from the high growth of the tech industry.

The bigger picture: Made in America.

The US’s own survey data on Wednesday pointed to a pick-up in both manufacturing and services industry activity, but the latter still fell short of expectations 🇺🇸 That stands to reason: other newly published data showed the country’s retail sales fell by more than expected both last month and the month before, and it’s no stretch to think that the drop-off could’ve carried into this month.

US retail sales fell more than expected in November after prior month revised to a decline
Source: Bloomberg
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