Morning Minutes 12/03/2018

Santa Arrives Early as Trade and Oil News Spark A Global Market Rally

December 3, 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

Although President Trump had to cut short his trip to the G-20 summit, he accomplished a lot while he was there, agreeing to a 90-day truce on new tariffs with China to give the two sides time to talk further. In exchange, China has agreed to additional purchases of US agricultural and other goods. President Trump along with the leaders of Canada and Mexico also signed off on the 3-way USMCA agreement, meant to replace NAFTA.

Investors have applauded the news sending equities soaring to start December, which has historically been a favorable month for stock markets. Overseas, the Hang Seng spiked up 2.5% and the Dax has popped 2.2% while the FTSE has advanced `1.7% and the Nikkei gained 1.0%. Building on Friday’s 199-point gain, Dow Futures are pointing toward a 450-point pop on the open or about 1.75%. As we have seen over the last two months’ however, the big question is whether markets will be able to maintain their early momentum through the entire trading day.

Commodities are also soaring today, particularly Crude Oil, where WTI and Brent are both up about 3.7% as investors react positively to a series of weekend developments. Most importantly for Canada, Alberta’s government announced a plan to force producers to cut production by 8.7% starting in the new year to ease the problem of oversupply relative to pipeline capacity in a bid to shrink the huge discount of the Canadian domestic oil price relative to US oil prices. This decision could spark significant moves in Canadian energy stocks today. Overseas, Saudi Arabia and Russia announced they intend to continue their OPEC+ supply management arrangement going into 2019 heading toward Thursday’s OPEC supply decision. Also, Qatar announced it is pulling out of OPEC as it plans to focus on natural gas production.

There are more events that could potential influence the markets today. Manufacturing PMI reports for the US and Canada are due mid-morning along with US construction spending figures. There also are four Fed members speaking.

On Wednesday, US markets will be closed for a Day of Mourning after the elder President Bush passed away on the weekend. Because of this, don’t be surprised of a number of US events scheduled for later in the week get moved around .

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