Equities fell on signs of tension in trade talks between China and the U.S. The dollar held steady and Treasuries dipped as China's chief trade negotiator reportedly said he was cautiously optimistic about reaching a phase-one accord. Pessimists focused on speculation Donald Trump may sign legislation backing Hong Kong protestors, setting up further conflict between the nations
U.S. equities were mixed following declines in Europe and Asia as concern that American support for Hong Kong protesters could complicate trade talks with China was offset by positive reports from retailers. The dollar rose alongside Treasuries. Telecom and automaker shares weighed on the S&P 500 Index. The 10-year Treasury yield fell to a two-week low and the offshore yuan slipped after China's threated retaliation following the Senate's passage of a bill that sought to support Hong Kong's autonomy from Beijing. After reaching fresh highs Monday, U.S. stocks have struggled for direction as investors search for a new catalyst to drive markets. While investors are sensitive to any reports on the economy, the biggest overhang continues to be trade talks between officials from the world's two largest economies. Analysts are looking for signs of progress as the U.S. and China seek a phase-one agreement to end their trade war. Travel and leisure companies led the retreat in the Stoxx Europe 600 index, with all major regional benchmarks in the red. Swedbank AB dropped after a report that American authorities are investigating possible breaches of sanctions against Russia by the Swedish lender. Hong Kong shares fell along with Japanese and South Korean benchmarks. Australian equities slumped after allegations of financial crimes at Westpac Banking Corp. hit financial stocks. Oil gained, paring some of Tuesday's more-than 3% loss.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was mixed these past two weeks with gains vs. the EUR & AUD and losses vs. the USD & GBP. Overall, trading ranges were fairly narrow with markets still tracking progress with regards to a U.S. / China trade deal. There were initial reports that both sides agreed to roll back tariffs upon completion of phase 1 of a deal. There were also reports that trade talks had broken down. Equity markets were generally unphased with the varying reports and trended higher for the most part. White House Economic Advisor Kudlow propelled risk trades further with positive trade comments late Thursday. The TSX hit the 17,000 mark while the DJIA hit 28,000 – both historical highs. Confidence of an imminent trade deal also saw the CNYUSD rate trade below 7.00 for the first time in 3 months. The U.S. 10 year yield also climbed to a 3 month high at 1.95%. Oil prices also benefited from the positive market sentiment gaining 4% to the $58 level. There were OPEC reports on the probability of deeper production cuts. The OPEC secretary commented on steep supply cuts within the U.S. shale industry along with an upswing in oil demand for 2020. USDCAD generally held between 1.3114 – 1.3199 before climbing above 1.3200 on Friday, Nov. 8th after the Canadian jobs data. Headline data missed estimates with a loss of 1,800 jobs in October after having added 53,700 in September. The unemployment rate held at 5.5% - near 50 year lows while wage inflation climbed to 4.36%. USDCAD has held above 1.3200 this past week with a gradual climb to 1.3272 followed by a decline to 1.3215 on Friday. The USD saw declines late in the week after U.S. Fed Powell's speech. U.S. retail sales data was mixed while industrial production data was much weaker than expected. The USD index declined from 1 month highs towards a 1 week low while 10 year yields dropped from 3 month highs towards a 2 week low.
U.S. China trade relations continue to dominate the economic news. Markets remain tepid this morning.
China's Global Times is out with another piece downplaying the chances of a US-China trade deal. There are no sources in the deal, instead the newspaper spoke to people who attended a US-China Entrepreneurs Roundtable."If the business roundtable was any indication, the trade negotiations still face major obstacles to reach any fair and reasonable deal," the report says.
U.S. stocks were mixed and the dollar slid as fresh doubts about a China trade deal weighed on sentiment, highlighting the fragile nature of recent gains as negotiations drag on. The S&P 500 Index was little changed from Friday's record close amid reports that Beijing is pessimistic about the chances of reaching an accord with the U.S. The Stoxx Europe 600 Index dipped while treasuries edged higher. The pound jumped as the Conservative Party maintained its poll lead less than a month before U.K. elections. Equity investors have been focused on the status of trade talks for months now, and were showing modest optimism last week after White House economic adviser Larry Kudlow's comment that U.S.-China talks were nearing the final stages. But with U.S. equities near all-time highs, any piece of bad news has the potential to reverse the gains of the past few weeks. Meanwhile, the dollar extended its slide after Federal Reserve Chairman Jerome Powell met with President Donald Trump and Treasury Secretary Steven Mnuchin on Monday to discuss the economy. Japanese and Chinese equities closed higher, while stocks slipped in India and Australia. Hong Kong's market outperformed, even as unrest in the city continued. China's yuan dipped after the country's central bank lowered borrowing costs on short-term loans for the first time since 2015 and injected $26 billion into the financial system. The moves were seen as aimed at shoring up confidence following a string of poor data in the second-biggest economy.
Yesterday, USDCAD climbed from 1.3250 up to 1.3272 – a 5 week high and fifth consecutive day of gains (albeit marginal – net gains on the week have been less than 35 basis points). The pairing then fell back to hold near 1.3242/55 for the balance of the day. Overnight, risk trades received a boost from positive trade comments from U.S. White House economic advisor Kudlow. The AUD, NZD, and CAD moved higher while the USD and JPY moved lower during the Asian session. CAD flows reversed during the London session taking USDCAD from 1.3219 back up to 1.3252. U.S. data this morning was a bit weaker than expected and USDCAD has pushed lower once again to 1.3217/22.
U.S. stocks fluctuated and bonds advanced as the risk rally that took equities to all-time highs stalled amid mixed economic data and mounting concern over a partial trade deal. The S&P 500 edged away from records reached over the last week sparked by hopes that the U.S. and China would soon hammer out an agreement. That hasn't happened, and there's been an abundance of signs that negotiations are stumbling. Adding to that, weak economic numbers out of China reinforced concerns that the trade war is weighing on the global economy.
Yesterday, USDCAD climbed to 1.3258 – a 4 week high before falling back to 1.3216. The pairing then moved back to hold near 1.3230/40 for the balance of the day. Overnight, risk aversion was elevated benefitting the USD and JPY and taking USDCAD up to 1.3268. The NZD is the best performing currency on the day after the New Zealand central bank surprisingly held its key interest rate at 1%. Risk flows have reversed course this morning while U.S. Fed Chairman Powell confirmed a likely pause in interest rate cuts as long as the economy remains on track. The OPEC Secretary offered up bullish commentary on oil suggesting a steep supply in U.S. shale output along with an upside swing in oil demand for 2020. Oil prices are back up near 6 week highs after the comments while USDCAD has fallen back towards session lows.
U.S. stocks rose as investors awaited clarity on the likelihood of a partial trade deal between America and China. The dollar and Treasuries advanced. The S&P 500 reached a record ahead of a talk by President Donald Trump at the Economic Club of New York at noon that could veer into comments on trade. Tech led the advance. Drugmaker AbbVie Inc. rose amid what may be the largest bond sale of the year to fund its Allergan Plc acquisition, while Walt Disney Co. gained as its much-anticipated streaming service debuted.
Yesterday, USDCAD dropped from 1.3198 down to 1.3160 before climbing to hold near 1.3175 for the balance of the day. The USD has seen broad gains starting during yesterday's North American session. The USD index (DXY) has climbed from near 3 month lows at the beginning if the week towards a 3 week high. U.S. 10 year yields have surged to 1.93% - a 3 month high. The 10 year was as low as 1.45% in September during the low point of the U.S. / China trade war. Optimism over phase one of a trade deal has helped propel equity markets to historical highs. Markets are down slightly today as Trump has reportedly not yet decided if he will roll back tariffs (there were reports that tariffs would be rolled back by both sides yesterday). Canada's job numbers missed estimates this morning sending USDCAD from 1.3200 up to 1.3237 – near a 4 week high. The pairing has since fallen back towards 1.3210.
U.S equities climbed early after China said it agreed with America to roll back tariffs on each other's goods in phases as they work toward a trade deal. Treasuries and gold declined. The S&P 500 Index rose at the open Thursday after a Chinese government spokesman said the economic superpowers would remove the duties in phases "as progress is made on the agreement." China is also reportedly studying the removal of curbs on U.S. poultry imports. Shares advanced in Hong Kong and China's yuan strengthened offshore. Equities trading in Shanghai and Tokyo had already closed. The Stoxx Europe 600 advanced.
Yesterday, USDCAD dropped from 1.3163 down to 1.3115 – a 1 week low and break of the 1.3130 support level. The move lower was short-lived as a better U.S. ISM data saw the USD broadly gain during the North American session. USDCAD climbed to 1.3180 before falling back to 1.3143. There has been little change overnight with most currencies in a holding pattern as the market awaits further developments on the U.S. / China trade front. China has reportedly asked that the September tariffs be rolled back. USDCAD climbed from session lows near 1.3153 up to 1.3184 this morning after weaker than expected Canadian Ivey PMI data. The pairing has since moved back towards 1.3167 despite a 2% decline in oil prices after EIA inventory data indicated a much larger than expected build in crude oil stocks.
U.S. equities were mixed Tuesday as investors digested the latest earnings reports and awaited more news about trade talks between America and China. Treasuries fell, while the yuan strengthened past 7 for the first time since August. The S&P 500 was little changed after a record-setting Monday, as declines in real estate and consumer staples offset advances in financial stocks. The Stoxx Europe 600 Index nudged higher, and oil rose for a third day, while gold slipped below $1,500.
On Friday, USDCAD dropped from 1.3170 down to 1.3140 before climbing to 1.3196 after the U.S. jobs report. The move higher was short-lived as broad-based USD weakness saw USDCAD close the week near session lows (1.3133/38). Global equity markets are on the rise today as European manufacturing data beat market estimates. Also, oil prices are up more than 2% on reports of deeper production cuts as OPEC meets on Dec 5-6. USDCAD has held a fairly narrow range with a brief move to 1.3160 followed by a decline to 1.3137 this morning.
Yesterday, USDCAD dropped from 1.3170 down to 1.3135 before climbing back to hold a 1.3160 – 1.3173 range for the balance of the day. The USD briefly gained this morning after headline jobs data beat expectations along with a +95,000 revision to the previous two months. USDCAD climbed from 1.3160 up to 1.3196 – just shy of Wednesday's two week high of 1.3203/08. The move higher was short-lived with the USD broadly falling as wage inflation was a touch soft and ISM manufacturing data was weaker than expected. The USD index has fallen to 15 week lows while USDCAD is back down near session lows @ 1.3150.
Stocks opened lower as concerns continues to swirl about the prospects for a long term trade deal between the U.S. and China. Many experts now think China will play the long game and placate the Trump administration in the short term while hoping for a more manageable president after next years election. A position that if it backfires could have dire trade consequences.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.caThe CAD was the top performing currency this week although trading ranges were fairly narrow in comparison to recent weeks. The Federal Election result was a non-factor for the CAD as was a poor retail sales report. The Bank of Canada Business Outlook Survey was good while overall market sentiment remained upbeat with North American equity markets gaining on the week and nearing recent historical highs. USDCAD opened the week near 1.3138 and fell to 1.3080 despite a 2.5% drop in oil prices. The move lower in oil prices was short-lived with OPEC reporting the possibility of deeper production cuts due to weak demand growth in 2020. EIA also reported a surprise draw from inventories sending oil up 7% from the lows to trade near a 5 week high. USDCAD eased lower over the course of the week with a series of lower lows and lower hjghs. The pairing stalled / closed the week near the 1.3050 level – within a half cent of the 2019 July low of 1.3016. The EUR gave back last week's gains falling back below the 1.45 level and nearing 3 year lows. The GBP also gave up a portion of last week's gains as the Brexit saga continued. The probability of a "no deal Brexit" can safely be ruled out however the UK is still seeking an extension to the negotiations while PM Johnson called a Federal election for Dec. 12. The JPY declined towards 6 month lows on U.S. / China trade progress and overall positive market risk sentiment. The market now turns its focus to the October 30th Bank of Canada and U.S. Fed interest rate decisions. The BOC is expected to hold at 1.75% while the Fed is expected to lower its rate from 2.00% down to 1.75%. The market probability of a Fed cut is 93.5% compared to just 53% one month ago.
U.S. stocks fluctuated after closing at a record as investors digest a spate of earnings reports ahead of tomorrows expected rate cut by the Federal Reserve. With the Bank of Canada weighing in as well with their announcement all eyes are on the two central banks upcoming releases Wednesday.
After closing the third straight week in the negative territory last Friday, the USD/CAD pair gained traction and rose close to 1.3080 during the European trading hours on Monday but struggled to push higher as this move is seen as a technical correction of last week's drop rather than a fundamentally-drive advance. Last week, hopes of the OPEC opting out for deeper production cuts amid dismal global energy demand outlook and a sharp drop in crude oil stocks in the U.S. provided a boost to crude oil prices and helped the commodity-related CAD outperform its rivals. The barrel of West Texas Intermediate (WTI) added 5.5% last week and is now staying in a consolidation phase above the $56 handle. Meanwhile, ahead of this week's critical FOMC meeting, the US Dollar Index is staying in a tight range. The Greenback came under some renewed selling pressure at the beginning of the week in response to a pick up in the sentiment surrounding the riskier assets on auspicious Brexit headlines, lifting GBP, EUR and US yields.
Stocks struggled for direction on Thursday despite strong earnings from Microsoft and Tesla.
The S&P 500 hovered along the flatline while the Dow Jones Industrial Average slipped 0.3%, or 73 points. The Nasdaq Composite climbed 0.3%. Microsoft reported earnings per share of $1.38 on revenue of $33.06 billion for the previous quarter. Analysts polled by Refinitiv expected a profit of $1.25 per share on revenue of $32.23 billion. Microsoft's strong quarterly performance was driven in part by Azure, its cloud business, which saw revenues grow by 59% on a year-over-year basis. The stock rose 1.4%.