Morning Minutes 12/07/2018

Oil Rally and Spectacular Canada Job Numbers Send the Loonie Soaring

December 7, 2018
8:45 am EST

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

World markets have been mixed overnight as investors have been digesting this week’s volatility and awaiting today’s two significant announcements.

Crude oil was steady overnight but has spiked upward on the last half hour. WTI and Brent are now up 2.0%-2.6% suggesting that investors are anticipating positive news from today’s OPEC+ meeting. Yesterday’s OPEC only meeting ended in indecision so investors have been hoping a deal can get done today. Earlier in the week, the over/under expectation was for a 1.3 mmbbl/d cut. A deeper cut would be bullish for oil, a smaller cut or not cut could send WTI back toward or under $50.00.

Yesterday saw US markets shake off early losses to end mixed indicating that the bears’ icy grip on the markets may be starting to weaken. The Dow finished down about 80 points or 0.3% Thursday but the NASDAQ managed to post a 0.4% gain. Treasury yields continue to slide which may help to support bond prices but volatility remains elevated with the VIX still above 20. `

Nonfarm payrolls increased by 155K jobs last month which is what I was expecting but less than the 200K the street was expecting. Last month’s 250K increase was revised down to 237K. Average hourly earnings rose 3.1% as expected to wage inflation was steady. Canada employment increased by an incredible 94K way above the street estimate of 11K, driven by an 89K increase in full-time jobs. Wow. The unemployment rate fell to 5.6% better then the 5.8% street estimate.

In reaction to this news, US index futures have been rising with Dow futures now down only 45K. The US Dollar is selling off on the job numbers while the Canadian Dollar is soaring on the back of the shockingly strong Canadian job numbers and the big rally in oil prices. The S&P/TSX fell 1.6% today but could bounce back today as sentiment toward Canada improves.

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