Morning Minutes 10/02/2018

Morning Minutes

Metals Rally as Markets Digest Monday’s Gains

October 2, 2018
10:00 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

US stock markets have been unable to keep Monday’s party going, instead giving back some of their gains. The Dow is flat today after rallying 0.75% on Monday, while the S&P/TSX is down 0.25%. Overseas markets have been trending lower for the most part, especially in Europe where the Dax and other major continental indices are down 0.6% with Italy preparing for a showdown with the EU over its planned larger budget deficit. Interestingly in Asia Pacific, the Hang Seng fell 2.3% but Shanghai gained 1.0% and the Nikkei rose 0.1%.

Commodity markets are mixed today. Metals are rallying with Silver surging 2.2% to approach $15.00/oz, copper climbing 1.4% and gold gaining 1.1% to trade back above $1,200/oz. This could attract interest to mining stocks today. Energy markets are mixed. WTI and Brent Crude are digesting their recent breakouts over $75.00 and $85.00 per barrel respectively. Natural gas is up 0.2% trading near $3.15/mmcf.

The Canadian Dollar has paused this morning to digest Monday’s big breakout. Although we could see some backing and filling today, yesterday marked a big turning point for CAD with the Loonie catching a big tailwind from the US and Canada reaching a deal on trade and averting a trade war, combined with continued gains in oil prices.

It’s a quiet day for economic news but we could see investors start to position ahead of tomorrow’s US ADP payrolls and Friday’s US nonfarm payrolls plus Canada Labour Force Survey reports.

Relative Strength and Sector Rotation Report:
The announcement that Canada has reached a trade deal with the US sparked a big relief rally in Canadian automotive stocks, which had been depressed lately with the sector having been under threat of tariff action had negotiations failed.

We did not, however, see a rebound in the Canadian forest products which had also been weakening on a relative strength basis in recent days.

Oil and Gas producers on both sides of the border strengthened yesterday for the most part, benefiting from a breakout over $75.00 by WTI crude oil.

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