Morning Minutes 3/6/2020

Morning Minutes

Oil Plunges as Russia Balks on Production Cuts; US Nonfarm Payrolls Beat Expectations

March 6, 2020
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

Crude oil prices are plunging today on reports that Russia has decided not to accept the latest proposal on production cuts. OPEC had proposed an additional 1.5 mmbbl/d be cut from production, 1 million from OPEC members contingent on 0.5 million coming from non-OPEC members (mainly Russia). Russia prefers to continue cuts at current levels, so for now it looks like the deal is dead.  The failure to cut supply has pushed oil prices sharply downward. WTI is down 4.6% this morning trading below $45.00/bbl, while Brent has broken below $50.00/bbl and is down 4.2%.

Economic news out of North America this morning has been more positive. US nonfarm payrolls grew by 273K in February, far above the 175K street estimate and my 200K guess. In addition, January payrolls growth was revised sharply upward to 273K from 225K. Meanwhile in Canada, jobs increased by 30.3K, well above the 10K street estimate and my 20K guess. It appears that so far, the coronavirus outbreak has not had much of a negative impact on employment, but we may get a better idea on that next month in addition to the potentially positive impact of this week’s twin 0.5% interest rate cuts from the Fed and the Bank of Canada.

It’s also a big day for trade data. Canada posted a slightly worse than expected trade deficit (-1.5B vs street -0.8B), while the US posted a slightly better than expected trade deficit (-45.3B vs street -46.1B). Tonight’s trade report from China may have a significant impact heading into next week’s trading as it may give more of an indication of how badly the coronavirus outbreak has impacted global trade. The street is expecting China’s trade surplus to fall to $24.6B from $47.2B, with exports expected to fall by 6.3% and imports expected to increase by 19.1%.

So far the positive employment news has not helped to lift spirits of investors. US index futures remain down 2.75%-3.00%. Dow futures are currently down about 725 points after falling 969 points, or 3.6% yesterday. On the other hand, bonds are on the rise again, and gold is up 0.8% trading near $1,680/oz. US equities are close to retesting last Friday’s lows which were near 2,855 for the S&P and near 24,700 for Dow futures.

Market Update With SIA Wealth Founder and CEO Jeremy Fehr

In light of recent market volatility, Jeremy has recorded a 17-minute webinar video with his current thoughts on the SIA Charts Equity Action Calltm, recent action in equity and commodity markets, and his analysis of key charts. To access the video, please click on the link below:

https://register.gotowebinar.com/recording/2494196353438372610

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