Morning Minutes 10/09/2018

Morning Minutes

Trade Tensions Take Their Toll; Canadian Energy Exploration Slows

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

US stock markets started the week off trading lower, tried to rebound Monday afternoon, but have turned downward again. Major European and Asian courses have also been in the red overnight and into this morning. The US Dollar is on the rise again, putting other currencies on their heels, but gold and the Yen are holding their own. With the VIX on the rise again (which is not uncommon in October, a month that has often historically been volatile for stocks), it appears a general retreat of capital from risk markets to defensive havens is underway.

Oil is bouncing back this morning with WTI and Brent trading near $75.00/bbl and $85.00/bbl once again. Natural Gas continues its seasonal upswing, gaining another 1.4% today in an advance toward $3.35/mmbtu.

Trade tensions appear to be taking their toll on the world economy, according to the International Monetary Fund. The IMF cut its world GDP growth forecast for 2018 and 2019 to 3.7% from 3.9% for both years. The agency particularly noted a slowdown
in world trade, cutting its 2018 trade growth forecast for 2018 to 4.2% from 4.8% which was already down from the 5.2% 2017 growth rate. The IMF also seems to suggest that both sides would lose in a US-China trade war, cutting its 2019 China GDP growth forecast to 6.2% for 2019 from 6.6% this year and its US GDP forecast to 2.5% in 2019 from 2.9% this year.

Relative Strength and Sector Rotation Report:
Canadian Drillers tumbled down the SIA Charts relative strength rankings on Friday. At first glance this seemed odd given that world oil prices have been climbing and we are heading toward the peak winter drilling season. It appears, however that lower Canadian
energy prices may still be taking their toll on exploration and development spending in this country. Looking at the October 6 Canadian Rig Count at boereport.com, there are currently 119 active Canadian oil rigs, down from 153 active rigs in late August but up slightly from 112 active rigs the same week a year ago. Natural gas activity is down sharply more this year, with only 63 drills turning compared with 97 rigs this time a year ago.

SIA Wealth in the Media:
Colin Cieszynski was quoted by Kitco News on the outlook for gold.
Gold Is Not Budging In Front Of Strong U.S. Economy, Rising Bond Yields – Analysts

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