Webinar Today and Morning Minutes 12/06/2018

Stocks and Oil Plunge as OPEC Meets on Production Cuts

December 6, 2018
8:45 am EST

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

Webinar Today!

SIA Market Update with Jeremy Fehr / BMO SIA Fund Launch Information

Thursday Dec 6 11:30AM MST/1:30PM EST

Please join our webinar on Thursday December 6th where SIA Founder and CEO Jeremy Fehr will give an update on current market conditions and a look toward 2019. In addition, Jeremy will also discuss the launch of two focused stock strategies in a fund/ETF structure. The funds go live THURSDAY DECEMBER 6th with the ETFs anticipated to follow a week later.


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Bears have returned to the markets in a big way overnight taking big swipes at both stocks and commodities.

Crude oil prices are down 3.4% this morning as OPEC and Russia meet to decide on a new round of production cuts. Heading into the meeting, investors had been leaning on a 1.3 mmbbl/day cut that Saudi Arabia had been hinting at as the over/under line, but overnight the Saudis seemed to be leaning toward a 1.0 mmbbl/day cut. OPEC+ appears to be caught in the middle between US President Trump who has been loudly calling for lower prices and no production cuts and investors who through market action have been clearly telegraphing that they would clearly like to see deeper cuts. In terms of stocks, investors may note that while lower energy prices have tended to have a negative impact on the price of energy related stocks, lower fuel prices can have a positive impact on consumer spending/confidence and on the profits of companies who use fuel such as transportation companies.

With US stock markets reopening today after yesterday’s Day of Mourning, bourses around the world have resumed their retreat. In Asia, the Hang Seng fell 2.4% overnight while Shanghai dropped 2.1%, the Nikkei fell 1.9% as a big diplomatic spat blew up between the US and China.

The CFO of China’s Huawei Technologies was arrested travelling through Vancouver. China is demanding her immediate release, while the US is demanding she be extradited to face charges apparently related to subverting sanctions against Iran. Investors appear to be taking this news as reducing the chances the US and China can reach a trade deal within three months.

In Europe today, the FTSE is down 2.3% and the Dax is down 2.5% as the Brexit bus careening out of control adds to the stress of global uncertainty. Yesterday, UK MPs voted to hold the government in Contempt of Parliament and also voted to give Parliament more say in any initiatives should PM May’s Brexit deal with the EU be defeated in next week’s vote, potentially widening the door for a second referendum.

The S&P/TSX finished up 0.8% on Wednesday and could get knocked around today by whatever happens with OPEC and the oil price. Outside of energy, Canadian exporters could benefit from a falling Loonie. In yesterday’s Bank of Canada statement, the Bank highlighted the risks to the Canadian economy and lowered inflation expectations as a result of the oil price crash. The tone suggests that the Bank is likely to keep rates on hold for longer and could even potentially cut rates sometime in 2019 depending on what happens going forward. Governor Poloz is speaking this morning, which could add more color to how the central bank is thinking about the future. This morning, Canada reported a $1.1B trade deficit, worse than the $0.7B deficit that was expected, another sign of softness north of the border.

Amid all of the turmoil out there, US index futures are trading lower again this morning. Dow Futures are down 372 points, but are up about 100 points from their 5:30 am low. US treasury yields also continue to sink with the 10-year falling to 2.90% and the 30-year falling below 3.20%. US ADP payrolls increased by 179K last month, less than the 195K street estimate which could exacerbate concerns that the US/Global economy may not be quite so robust moving forward as the expansion matures. Falling yields may help to support bond prices and could also attract renewed interest to interest-sensitive sectors of the stock market including Utilities, Telecom/Cable companies, and Real Estate.

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