Morning Minutes 9/17/2019

Morning Minutes

The Calm Between The Storms

September 17, 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

Equity and commodity markets appear to be digesting yesterday’s big rallies in oil and energy stocks while waiting for the next shoes to drop. Dow futures have been steadily sinking through the morning and are currently down about 140 points or 0.5%. Over in Europe, the Dax is down 0.1% while the FTSE is up 0.1%. Overnight in Asia Pacific trading, China stocks sold off to catch up with Monday’s retreat in other parts of the world, sending Hong Kong down 1.25% and Shanghai down 1.75%. Gold and the VIX are essentially flat today indicating that although recent events have made investors warier and more tuned into political risks, they have not started a panic.

Oil prices have dropped back a bit this morning in what looks like a normal and common correction following their big Monday rallies. The US doesn’t appear to be in a hurry to launch retaliatory strikes against Iran, Iran made it clear they have no interest in speaking to the US and questions have grown over what Saudi Arabia is doing (or not doing) to protect its energy infrastructure.

Investors now appear to be waiting for the next set of potential developments. Saudi officials are expected to speak later this afternoon and investors may look to them for clarification on how much oil production has been shut in and how long it could take to restore production. The UN General Assembly starts today which usually has no impact on the markets but any comments that come out of it over the next several days from the US, Iran or other parties about the growing political tensions in the Middle East, Brexit, or the US-China trade war could attract attention from investors.

Last but not least, a 2-day Fed meeting gets underway today but the main investor reaction will likely be tomorrow afternoon when we get the interest rate decision, statement, member projections and press conference. A 0.25% interest rate cut is still widely expected but investors don’t appear to be as certain about the number and timing of US rate cuts as they were before as treasury yields have been rebounding lately. As the Bank of Canada did earlier this month, the Fed appears to be looking to walk a fine line between doing or saying enough to support the current expansion and indicate readiness to deal with the economic fallout of political developments, without coming off as too accommodating which could stoke recession fears and spook investors.

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