Morning Minutes 7/10/2020

Morning Minutes

News Drought Leaves Markets Indecisive

July 10, 2020

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

Its been a really quiet week overall for economic and corporate news, leaving markets struggling for direction and investors trying to glean insight from anecdotal and secondary reports.

Overnight action saw Asia Pacific markets giving back some of the gains made earlier in the week in what looks like a normal trading correction. Hong Kong and Shanghai both dropped about 1.9% while Tokyo fell 1.0%. European markets, on the other hand are up this morning with the DAX and FTSE both gaining about 0.4%. Investors have responded favorably to reports of stronger than expected May rebounds in industrial output for France (19.6% vs street 15.1%) and Italy (42.1% vs street 22.8%).

US index futures have been falling this morning with Dow, S&P and NASDAQ futures falling 0.4%-0.7% coming off a mixed day which saw the Dow fall 1.4% but the NASDAQ climb 0.5%. COVID-19 cases continue to climb, but the bigger worry for investors appears to be new comments from presumptive Democratic candidate Joe Biden (who has been leading in recent polls) which appear to be drawing battle lines between Wall Street and Main Street for the upcoming campaign, including a plan to increase corporate taxes, stating he wants to end the “era of shareholder capitalism”, indicating that he would focus on working families, “not the wealthy investor class”, and complaining about President Trump’s focus on the stock market as an indicator of his success.

The loonie is down slightly this morning following a mixed Canadian employment report. There was a 952K rebound in jobs, which was better than the 700K bounce the street had expected, but the unemployment rate of 12.3% was slightly worse than the 12.0% investors had been expecting and the 11.3% the US reported last week.

One positive aspect of the lack of news flow is that there have not been any major market-moving profit warnings following the end of the quarter. Next week, focus turns to corporate news as US earnings season kicks into gear with reports due from some of the big cap leaders in the Financial Services (banks, brokers and asset managers), Technology, Communications Services and Consumer Staples sectors.

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