Morning Minutes 11/02/2018

Morning Minutes

Trade Deal Speculation, Apple Earnings and Nonfarm Payrolls In Focus

November 2, 2018
8:45 am EDT Page 1

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

Overseas markets have soared overnight on speculation that trade tensions between the US and China could ease following a telephone conversation between President Trump and President Xi, setting up the potential for a breakthrough when the two meet at the G20 summit later this month. The Hang Seng spiked up 4.2%, Shanghai popped 3.5% and copper rallied 1.6%. Hopes that some of the trade talks that have created uncertainty which has dragged on markets this year could get resolved in the coming weeks also appears to be carrying into European trading where the FTSE is up 0.6% and the Dax is up 1.5% continuing yesterday’s gains which came on on reports of pro-gress toward a Brexit deal.

US index futures are trading upward as well this morning but have come off their highs since a very strong US nonfarm payrolls report caused US treasury bond yields to rise again. Nonfarm payrolls increased by a spectacular 250K last month, way above the 190K street estimate. This exceeded my own bullish estimate of 225K. Average hourly earnings increased to 3.1% as was widely expected, confirming growing wage pressures. Strong job growth and increasing wage inflation pretty much locks in a De-cember Fed rate hike and increases pressure on the central bank to keep raising rates through 2019.

Canadian employment increased by 11K, pretty much in line with street expectations. Full time jobs increased by 33K while part-time jobs fell by 22K. The transition of work from part-time to full time is a sign of a strong economy for Canada. The US and Cana-dian Dollars are holding pretty much steady against each other on this news.

The news hasn’t been all rosy, however. Apple shares fell 5-7% in aftermarket trading last night and appears to be in jeopardy of losing its Trillion Dollar market cap status today. EPS of $2.91 came in well above the $2.78 street estimate while sales of $62.9B were also above expectations. Investors focused instead on the disappointing aspects of the release; iPhone sales of 46.89M which fell short of the 47.5M the street had been hoping for and sales guidance for next quarter of $89B-$93B which was just below what the street was anticipating. The company also announced that going forward iPhone, iPad and iMac unit sales will all be lumped into one figure.

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