The markets have started the day on a positive note as two main issues seem to be trending to the positive. The UK and EU have come to a tentative Brexit deal, however it must be ratified by both parliaments in order to come into effect. Meanwhile comments out of Chinese trade officials soothed traders angst over the U.S., China trade spat.
U.S. stocks fell, led by a drop in technology shares, as earnings season rolled on. The pound fluctuated amid Brexit negotiations. In earnings, Bank of America jumped after deal fees surged, continuing a string of strong bank results. Regional banks including Bank of New York Mellon and PNC Financial advanced after delivering solid quarterly numbers. A dollar gauge edged lower and Treasuries rose after a report showed retail sales unexpectedly declined. The Stoxx Europe 600 dropped, while benchmark indexes in Asia finished mostly higher, though most gauges trimmed the gains after China threatened to retaliate if the U.S. offered legislative support to pro-democracy protesters in Hong Kong. Stocks dipped in Shanghai and the yuan weakened. The Hong Kong standoff and Brexit doubts are moving geopolitical risks back to the forefront for investors.
Reports that China is seeking the US to remove retaliatory tariffs in exchange for fulfilling its obligation to deliver on $40-$50 billion US agricultural purchases have markets in the black so far this morning. Meanwhile Brexit negotiations seem to be progressing better than expected with sources more hopeful that a deal could be reached over the next little while
Yesterday, USDCAD dropped from 1.3345 (highest since June 19th with the exception of Sept. 2 and 3rd that saw brief rallies to 1.3360 and 1.3380 respectively) down to 1.3268 before holding near 1.3300 for the balance of the day. Today, Canadian job numbers were surprisingly strong for the 2nd consecutive month (70,000 full time jobs were added while the unemployment rate ticked down to 5.5% - near a 50 year low) sending USDCAD from 1.3295 down to 1.3185 – near 10 week lows. The USD and JPY are broadly lower these past two days as uncertainties subside on two key fronts: U.S. - China trade talks appear to be making progress while a meeting between Irish and UK PMs has increased the odds for a Brexit deal. The GBP has surged 6 cents over the past two days and now trades near 4 month highs.
The US stock market is open and is drifting higher as US and China officials gather for trade negotiations. The optics from China seem to be more positive, but the devil is in the details of what they are willing to do. The feeling in the market is buying pork or agricultural goods is old news to the Trump administration. Does the concessions stop new tariffs being imposed, is probably the best case scenario.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.caThe CAD looked like it was going to outperform for the 3rd consecutive week with gains against all the major currencies into Wednesday's session. Despite a 500+ pt drop in the DJIA on Tuesday and a 7% decline in oil prices (Mon and Tues), USDCAD dropped to 1.3205 – about a 3 week low while the EURCAD rate dropped to 1.4415 – a new 30 month low. The catalyst for the market sell-off was a surprisingly weak U.S. ISM manufacturing index reading. At 47.8 (a reading below 50 signifies economic contraction) it was the worst reading in 10 years and sparked broad-based USD selling, a 3% decline in oil prices, and a 500+ point fall in the DJIA. The trend for the CAD abruptly changed during Wednesday's North American session. Although the USD continued to sell-off against the other major currencies after weaker than expected ADP employment data sparked another market sell-off. Oil prices fell another 4% while the DJIA fell by as many as 650 pts. USDCAD climbed from 1.3205 up to 1.3335 – near a 3 month high. Although markets and oil prices rebounded on Thursday, (oil lost 3% to trade near 9 month lows before bouncing back by 3% while the DJIA also gained 500+ pts after initially falling 400pts) USDCAD held steady above the 1.3300 level. After marginal gains to 1.3347 and a dip to 1.3310, a 2nd move higher stalled at 1.3345. The pairing eased lower to 1.3310 heading into the Friday U.S. employment data release. The results were mixed – the unemployment rate moved from 3.7% down to 3.5% - a 50 year low while August headline data was revised from 130,000 up to 168,000. The Sept headline was weaker than expected and wage inflation was low. USDCAD dipped to 1.3298 before climbing back to 1.3334. The move higher was short-lived with a move down to 1.3310 into the close. The CAD ends up as the worst performing currency on the week. The USD was the 2nd worst performing currency having also given up gains from earlier in the week.
Stocks rose in the U.S. and Europe as China revived hopes of progress in trade talks with the Trump administration this week despite potential headwinds. The Stoxx Europe 600 Index advanced for the third day. Ten-year Treasury yields climbed past 1.55%. The Turkish currency and its stocks dropped after the country began a military offensive in Syria against Kurdish militants. High-level U.S.-China trade talks are set to resume in Washington on Thursday after what seemed to be escalating tensions to start the week. While a broad agreement seems unlikely, China signaled it's open to a limited deal, provided no more tariffs are imposed, according to an official. In return, Beijing would offer non-core concessions like purchases of agricultural products without giving in on major sticking points, the official said, without offering further details. Investors are also looking to gauge the next moves by major central banks. Chairman Jerome Powell said Tuesday that the Federal Reserve will resume purchases of Treasury securities to avoid a repeat of recent turmoil in money markets, while hinting at the possibility of another rate cut. Minutes of the Fed's most recent rates meeting will be released this morning at 11am, providing further insight into policy makers' thinking ahead of their next meeting at the end of the month. Benchmark equity gauges fell across Asia, except for those in Shanghai and Mumbai. Bond yields dropped in Greece after the region's most-indebted country sold bills at negative yields. The yuan climbed offshore and headed to its biggest gain in almost a month, helped by trade optimism and a stronger-than-expected daily fixing.
Stocks have moved lower today on trade pessimism.
A couple of stories are coming forward. One says that the Trump administration is moving ahead with possible restrictions on capital flows into China, including investments from US government pension funds. This follows a similar story about capital controls. According to people familiar with the meeting, the administration's focus is now on ways to further scrutinize index providers' decision to add Chinese firms they consider a material risk for American investors. It's still unclear what legal authority the White House would rely on to force major indexes to drop certain Chinese companies. A separate report from the SCMP says China is already considering a plan to cut short its stay in Washington by one night and that Beijing is subtly toning down expectations. "There's not much optimism," a source was quoted as saying.
U.S. equity indexes erased losses as traders weighed the outlook for a trade deal between China and the Trump administration. European stocks gained with oil. Equities got a boost after White House adviser Larry Kudlow said the U.S. has no plans to delist Chinese companies, helping sentiment after a report that senior Chinese officials have indicated the range of topics they're willing to discuss at upcoming talks has narrowed considerably. The EUR edged higher for a 5th session while the GBP dipped as European leaders cast doubt on reaching a Brexit agreement in time for the U.K.'s Oct. 31 deadline. In the wake of a slew of weak data and with protectionism portrayed as the main impediment to global growth, investor focus will return to foreign trade this week as Chinese Vice Premier Liu He and an entourage of officials head to Washington to resume talks with their U.S. counterparts. As economic indicators flash warnings, traders have ramped up bets for further Federal Reserve rate cuts. They'll search for new clues on the policy path when minutes from the latest Fed meeting are released in coming days. Japanese equities closed little changed, while Shanghai markets are yet to re-open after holidays. Hong Kong was also shuttered for a holiday, leaving traders with limited options to respond, or not, to escalating violence in the city, where protesters set fires and vandalized train stations and banks over the weekend. The yuan dropped in offshore trading by the most since late September.
Yesterday, USDCAD climbed from 1.3320 up to 1.3347 (highest since June 19th with the exception of Sept. 2 and 3rd that saw brief rallies to 1.3360 and 1.3380 respectively). Overnight, the USD broadly weakened heading into the release of the U.S. jobs report taking USDCAD down to 1.3310. The report was mixed with the unemployment rate falling to a 50 year low and prior data revised higher by 38,000 jobs. However, wage inflation was weak – a signal that the U.S. Fed could lower interest rates further. U.S. 10 year yields are down to 1.52% (near 3 year lows) from 1.90% 3 weeks ago while equity markets and commodities have rallied higher on the results. USDCAD dipped to 1.3298 but has since climbed back to 1.3320.
U.S. stocks slid, while Treasures rose for a sixth day after key data confirmed concerns that the world's largest economy may be struggling. The S&P 500 fell for a third day after suffering the biggest two-day drop since August amid growing signs the economy is weakening. Data on the all-important services sector fell to the lowest level since August 2016. Investors will now look to the the nonfarm jobs report Friday for more evidence of weakness. The 10-year Treasury yield fell below 1.52% as markets raised bets the Federal Reserve will cut rates this month. The dollar dropped for a third day.
U.S. stocks rose at the start of trading as investors continued to push into risk assets, while Treasuries declined along with global debt after Japan said it may slash its bond buying. The dollar advanced against the yen. The S&P 500 rose for a second day lead by technology shares. The 10-year Treasury yield headed for its first increase in four days in the wake of a weak Japanese bond auction that was sparked by its central bank's decision to potentially cut bond purchases this month and the government pension fund's plan to buy more foreign debt. The greenback touched a two-year high against major currencies. European shares fell following data that showed the region's manufacturing sector slumped last month and inflation slowed, retrenching concerns about a worldwide economic slowdown. The pound declined as British Prime Minister Boris Johnson prepared to present his blueprint for a new Brexit deal to the European Union.
Yesterday, USDCAD initially dropped from 1.3265 down to 1.3231 (near 2 week lows) before climbing back to hold a 1.3263/77 range for the balance of the session. The range this week has been extremely narrow – just 72 pips (1.3231 - 1.3303). The USD and JPY are broadly weaker this morning while the EURO has recovered after hitting a 3 year low vs. the USD overnight. USDCAD has fallen from 1.3277 and has just broken below the weekly low of 1.3231. Oil prices were down 3% earlier towards the pre-Saudi attack levels from two weeks ago but have since recovered.
Stocks fell on Thursday after a whistleblower complaint against President Donald Trump was released. Traders also monitored the latest trade developments. The Dow Jones Industrial Average traded 31 points lower, or 0.1%. The S&P 500 dipped 0.3% while the Nasdaq Composite pulled back 0.5%. CAD / USD continued to trade in a very narrow band. In general a quite day on all the currency fronts.
U.S. stocks fell for a 4th day as the impeachment drama intensified, adding another risk to markets already on edge over trade and slowing global growth. The S&P 500 briefly dropped to session lows after the White House released a rough transcript of President Donald Trump's call with Ukraine that is at the center of the latest controversy to grip Washington. Markets have seemed to gyrate in the twists and turns of the protectionist battle between the two largest economies, with this year's epic bond rally recovering from pullback and U.S. stocks lingering within sight of a record high. The sudden escalation of political risk in Washington comes as economic signals deteriorate globally, adding a fresh complication for investors trying to decide whether the central banks will be able to shore up growth. In Europe, the mood was more dour. The Stoxx Europe 600 Index headed for its largest drop in 6 weeks amid rising concern that growth in flagging. Elsewhere, the GBP slumped as Britain's attorney general said a motion for a general election will be brought to parliament shortly.
The US major stock indices are opening higher on the back of US/China trade hopes. Meanwhile in Britain, a High court ruling on Brexit issues pumped up the pound. Most of the major currencies are trading in a very narrow band this morning as traders search for clues on the global economic outlook.
U.S. stocks fell for a second day and equities in Europe tumbled after data from the euro-area raised the specter of a prolonged downturn. Treasuries rose on mixed American data. The S&P 500 was lower amid IHS Markit data that largely met expectations, although a gauge of employment in services industries pointed to job losses for the first time in almost a decade. Similar readings in Germany and France fell far short of estimates, sending stocks in the region down 1%. U.S. Futures had been higher overnight on signs of easing trade tensions. American money-market interest rates held steady. The employment reading suggested U.S. job gains will slow further, after the 4-month average of hiring at companies fell to the lowest since 2012. The gloomy data from the heart of the euro area was a stark reminder to investors of the fragility of the global economy. While markets remain on edge ahead of next month's planned high-level trade talks between the U.S. and China, they're also fixated on any action or messaging from the world's major central banks that could support growths.
Yesterday, USDCAD initially climbed from 1.3280 up to 1.3307 before falling to 1.3242. The pairing then eased back to hold a 1.3255/70 range for the balance of the session. The move lower effectively erased the gains seen Thursday after the U.S. Fed interest rate decision which resulted in a brief move from 1.3275 up to 1.3305 – a 2 week high. Canadian retail sales data for July out this morning missed market estimates sending USDCAD from 1.3270 up to 1.3294. After pulling back to 1.3278, a 2nd attempt higher stalled at 1.3295/1.3300. The pairing has since fallen to 1.3265. Both the EUR and GBP are trending lower today as the chance of a "No-deal Brexit" increases on reports that the UK and EU are "as far from agreement to replace (Irish) backstop as ever." The GBP and the EUR have been the best performing currencies in recent weeks trading near 3 month and 3 week highs respectively.
In the premarket, the futures for the major indices were implying a lower opening. However, those declines have been erased, and the major indices are opening with modest gains. Costco and US Steel were downgraded and are trading lower, but Microsoft announced after the close a 11% increase in dividend and a $40 billion buyback repurchase program.
In the US debt market yields remain lower with declines of over three basis points out the curve.
Bonds rallied globally while stocks struggled for traction before the Federal Reserve concludes its policy meeting Wednesday, with officials expected to cut interest rates again and possibly move further to calm money-markets rates. The S&P 500 Index edged lower, with FedEx Corp. tumbling after the company slashed its profit outlook, blaming a global economy weakened by trade tensions. Europe's equity benchmark eked out an advance. Government bonds climbed from the U.S. to Japan, with the 10-year Treasury yield dipping below 1.8%. The surge came after the Fed had to inject cash Tuesday to soothe money markets -- an intervention it repeated Wednesday. While Fed officials are widely expected to cut their benchmark rate by a quarter-point, some investors are saying the central bank may also boost its balance sheet to stabilize the volatile repo market. Traders also are keeping an eye on whether a potential oil shortage weighs on the global economy, and on preparations by the U.S. and China for top officials to meet on trade in October