Morning Minutes 11/23/2018

Crude Oil Crunch, Canada Data and Black Friday in Focus

November 23, 2018
8:45 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 reopen today for a holiday shortened session. Usually on Black Friday, markets don’t move much as we have been seeing that elsewhere as Toronto was flat yesterday and in Europe, the FTSE and Dax are pretty much flat this morning. Some China-sensitive markets have been under pressure overnight was Shanghai which fell over 2% ahead of next week’s G-20 summit and trade talks between US President Trump and Chinese President Xi. US index futures have bounced up off of their early morning lows with Dow Futures currently down about 85 points or 0.3%.

Because many market participants are away for holidays and volumes are light, sometimes markets that do move can see violent swings in thin trading. A potential case in point is energy commodities. WTI Crude oil has plunged 5.25% this morning down to its lowest level for 2018 near $51.75, while Brent Crude is down 3.3% on reports that Saudi Arabia has joined the US in producing at record rates. Natural gas is down 2.3% with a cold snap in some consuming regions wrapping up and a rebound in temperatures expected into the weekend. I wonder if part of the oil selloff is keeping OPEC members’ feet to the fire heading into the December 6th OPEC meeting where production cuts for next year are rumored to be on the agenda.

It’s Black Friday, the busiest shopping day of the year in the US, so we could see some activity in the stocks of US retailers. The group had been under pressure earlier in the week, so it will be interesting to see if sales and mall traffic can exceed lowered expectations or not. The split between online and traditional retailers’ sales over the next few days could also attract attention from investors.

While the energy and retail groups may be active today, overall fear gauges have been mixed. The VIX has jumped this morning back up above the 20 handle, but gold is down 0.5%. This action suggests that whatever action we do see today is likely to be discounted and Monday’s trading may give us a better idea of where investor sentiment is currently at.

The Canadian retail sales report was mixed. Headline sales rose 0.2% in September, slightly better than the 0.1% street estimate. Excluding autos, sales increased by 0.1%, slightly less than the 0.3% street estimate. I suppose this is good news for the auto sector at least which has been struggling this year.

Canadian consumer prices rose 2.4% over year, more than the 2.2% street estimate. Although this puts pressure on the Bank of Canada to raise interest rates again, the Loonie hasn’t really reacted to the news. I’ve really noticed that gasoline prices are a lot lower these days and investors may be recognizing that falling energy prices could take some of the edge off inflation in future months.

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