Morning Minutes 10/19/2018

China GDP, Canada Retail Sales and Earnings in Focus

October 19, 2018
9:00 am EDT

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

It has been another very choppy week for world stock markets but indices appear to be trying to finish the week off on a positive note. Dow futures are up about 100 points or 0.4% as they try to shrug off yesterdays 327 point or 1.3% drop.

Earnings reports continue to have a big impact on selected stocks. Yesterday, Textron plunged 11.25% while Snap-On Tools fell 9.6%. These selloffs in the Industrials sectors showed that investors concern about earnings and valuations extends to all sectors in the market, not just Technology, Financials and other interest rate sensitive groups.

Highlights of today’s earnings reports include:

Rogers Communications            EPS $0.93 above street $0.88

Canadian Pacific                              EPS $4.12, above recent pre- announcement of $4.10 and year ago $2.90

Honeywell                                            EPS $2.03 above street $1.99, company cut full year EPS guidance down to $7.95-$8.00 from $8.10-$8.20

SunTrust Banks                                 EPS $2.2 vs street $2.73

In contrast to the US where high expectations have left the door wide open to disappointment, investors have responded favourably to mixed economic numbers out of China. The Hang Seng rallied 1.3% overnight while copper has climbed 1.4% and WTI crude oil is up 1.0%. These gains suggest that this year’s big selloff in China sensitive markets has dramatically lowered expectations to the point that soft numbers may not be as bad as the despondent, fearful levels already priced in.

Highlights of overnight China data include:

Q3 GDP                        6.5% below street 6.6%

Retail sales                   9.2% above street 9.0%

Industrial production      5.8% below street 6.0%


Canadian retail sales and inflation numbers are also out this morning. Highlights include:

Retail sales                   (0.1%) below street 0.3%

Retail sales ex autos     (0.4%) below street 0.2%

Consumer Prices           2.2% vs street 2.7%

Core CPI                      1.5% vs street 1.8%

The loonie is weakening on this news, which reduces the pressure on the Bank of Canada to raise interest rates again this year. The news also suggests that uncertainty related to trade talks did take its toll on the Canadian economy last month. Canadian energy stocks have been weakening this week with oil and gas prices in correction mode. Today the retailers, telcos and railroads could be active on developments.

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