Morning Minutes 09/18/2018

Morning Minutes

Copper and Crude Oil rally as US and China Announce New Tariffs

September 18, 2018
10:00 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

Today’s trading in major commodities looks like a case of “sell on rumor, buy on news”. For several weeks now, commodities and China-sensitive markets have been trending lower on speculation the US-China trade war could seriously escalate, potentially destabilizing global trade and the world economy. Often with events that revolve around negotiations, like trade deals or labor disputes, markets often price in speculation, then reverse when the events happen as traders take profits against news.

Overnight the US and China announced a new round of tariffs against each other, but the measures were not as aggressive as they could have been. The US is going ahead with new tariffs on $200B of Chinese imports but the rate is 10% not the 25% or more it could have been. President Trump decided at the last minute to exclude tariffs on Apple products removing what could have become a high-profile negative impact on US consumers. China, meanwhile, introduced tariffs on only $60B of US imports opting not to bring in additional measures.

These moves could be seen as leaving the door open for more talks and potentially finding a way for them to get out of this mess while saving face, perhaps after the midterm elections, sparking some relief among investors and a relief rally in markets that had been depressed by trade war fears. Copper is up 2.8% today while WTI crude oil is up 2.0%, regaining the $70.00/bbl level. The Dow and the S&P/TSX Composite are up 0.3% to start the day with energy producers and miners potentially attracting renewed interest as commodity prices rise. The VIX is down 5.4% indicating that fear is
fading for now.

The Canadian Dollar is up 0.35% boosted by a positive Canadian manufacturing shipments report. Shipments grew 0.9% in July, more than the 0.6% street estimate and the previous month was revised upward as well. Oil sensitive markets could be active through the day with weekly API inventories due later in the day. Strong demand, the impact of sanctions on Iranian exports and slowing US production could all influence stockpiles.

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Webinar Replay Information:
SIA Charts recdently hosted its monthly webinar which included comments on the market from Chief Market Strategist Colin Cieszynski. Ted Bader, President of SIA Wealth also gave a presentation about the 2 Funds SIA Wealth runs, specifically focusing on the strong performance of the US tactical pool as well as recent changes that have been made to the Tactical Market Neutral Pool. A link to the replay is below. Colin and Ted each spoke for about 20 minutes, with some questions afterward.

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