Morning Minutes 9/3/2019

Morning Minutes

Stocks Fall as New Tariffs Overshadow Positive PMI Reports

September 3, 2019
8:45 am EDT

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

North American investors returning to work from the holiday weekend have been greeted with a selloff sparked by the US and China’s threats of new tariffs against each other becoming reality. While there’s still talk of the two sides getting together sometime this month, details remain sketchy, making investors nervous. Dow futures are down 230 points or 0.8%. Meanwhile, over in Europe, the Dax is down 0.35% and the FTSE is down 0.25% with UK PM Johnson threatening to call a snap election for October 14th (two weeks ahead of the October 31st Brexit deadline) should MPs or the courts stymie his plans for a No-Deal Brexit.

WTI crude oil is getting really hammered falling another 2.2% while gasoline is down 3.3%. It appears at this point that investors are more concerned that Hurricane Dorian could reduce short-term demand more than short-term supply, depressing energy prices.

As is usual at the beginning of the month, Manufacturing PMI reports have been rolling out, an early indicator of economic health. China’s reports were mixed with the government’s manufacturing PMI sitting just below 50 in contraction territory at 49.5, but the private Caixin manufacturing PMI popping back into expansion territory at 50.4 and beating the 49.8 street estimate. Reports for the UK (47.4) and Germany (43.5) both came in below 50 and below street expectations

Later this morning, manufacturing PMI reports are due for the US and Canada. In the US, the street is expecting 51.0 for the national reading but investors should note that on Friday, the regional Chicago PMI beat the street handily (52.4 vs street 47.5), so a positive surprise appears possible. US construction spending is also due at 10:00 am EDT today with the street expecting a 0.3% rebound following last month’s 1.3% plunge.

Canadian manufacturing PMI is also due this morning and represents the last data point before tomorrow’s Bank of Canada meetings. Friday’s data which included Q2 GDP growth of 3.7% which beat the 3.0% street estimate, and weaker than expected producer price inflation suggests that there isn’t much pressure on the Bank of Canada to do anything on interest rates at tomorrow’s meeting. Overnight in fact, the Reserve Bank of Australia (who has a similar economy to Canada’s) held rates steady, although they have already cut rates twice this year as China slowed.

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