Morning Minutes 11/28/2018

High Noon Showdown and More Bank Earnings

November 28, 2018
8:45 am EDT

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

Stock markets have been mixed overnight and into this morning, but overall, continue to show signs of bottoming out. In Asia Pacific trading, the Hang Seng and Shanghai both rallied 1.3% and the Nikkei gained 1.0% as investors await Saturday’s dinner meeting on trade between US President Trump and Chinese President Xi. Upward momentum petered out in Europe a bit where the FTSE and Dax are flat but has picked up again in North America. The Dow appears set to build on yesterday’s 108-point gain with Dow futures up 168 points so far.

The S&P/TSX finished down 68 points and may find itself being buffeted between the negative of falling oil prices on energy stocks and the reaction to bank earnings. Crude oil is under pressure again today with WTI and Brent both down another 1.8% as bears keep the pressure on OPEC ahead of next week’s production decision. Brent has broken under $60.00/bbl while WTI is holding $50.00/bbl so far. Natural gas, on the other hand, is rallying as temperatures drop again, posting a 6.2% gain so far today and taking a run at $4.50/mmbtu.

Meanwhile, Canadian bank earnings season has picked up from Scotiabank’s sluggish start with Royal Bank posting strong results this morning.   Royal Bank announced quarterly EPS of $2.20 up 17% from a year ago and well above the $2.12 street estimate. Results included gains across all of its major business lines including 10% growth in retail banking, 13% growth in wealth management, 14% growth in investment banking and 20% growth in insurance. Management noted that at this stage in the cycle, rising interest rates have had a positive impact on their bottom line with enough increases to widen their margins but not enough increases to slow the economy or dampen new loan demand.

There is the potential for a midday change in direction today with Fed Chair Powell speaking at noon Eastern Time. President Trump as been highly critical of Powell’s ongoing interest rate hikes which I find laughable because Trump previously criticized then ousted former Fed Chair Yellen for keeping rates too low and Powell was his guy to replace her. Still we should get a better idea from his comments whether Powell has been fazed by any of this or if the Presidential chatter is more noise.

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