Morning Minutes 9/4/2019

Morning Minutes

Hong Kong and Brexit Developments Spark Stock Rally

September 4, 2019
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

Two big political developments over the last 24 hours have sparked rallies in world stock markets overnight and into this morning.

The Hang Seng soared 3.9% and Shanghai gained 0.9% on the news that the bill that would have allowed extradition to China from Hong Kong, which was one of the reasons behind the summer of protests, has been withdrawn, easing political tensions.

Meanwhile in Europe, the Dax is up 1.0% and the FTSE is up 0.4% as a number of key defections/evictions from the UK Conservative party has increased the chances that PM Johnson’s plan for a No-Deal Brexit could be blocked and an election could be called ahead of two key votes in the UK Parliament today.

Positive sentiment from both developments has carried on into North American pre-market trading where Dow futures are up 225 points or 0.8% and NASDAQ futures are up 1.0%. Commodities are also climbing again with WTI crude oil gaining 1.5% and copper popping 1.6%. Defensive haven gold is down 0.6%, while the VIX volatility index has also dropped back.

North American trade reports are out this morning. Canada ran a $1.2B trade deficit in July, worse than the $0.4B deficit investors had been expecting.  The US had a $54.0B trade deficit in July which was an improvement on June’s $55.5B deficit but slightly worse than the $53.6B street estimate.

The Bank of Canada’s latest interest rate decision is due this morning at 10:00 am. Although several other central banks around the world have cut their benchmark rates lately, the street is expecting Governor Poloz to buck that trend and hold rates steady. Between the recent strong Q2 Canadian GDP report, soft Canadian producer price report and the fact that the loonie has come down in recent week’s relative to the US Dollar, the bank is not under significant pressure to make a move at this time, although they could keep their options open in the statement.

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