Morning Minutes 7/20/2020

Morning Minutes

Earnings, Energy and Europe In Focus

June 20, 2020

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

Stock markets around the world are seeing a mixed start to the trading week. Shanghai sored 3.0% overnight after China allowed insurance companies to increase their allocation to equities, while the People’s Bank of China held its interest rates steady.

European markets are mixed this morning as investors await the results of an EU summit which started on Friday, continued all through the weekend and is ongoing as leaders haggle over the details of a big fiscal stimulus package. The Dax is up 0.45% this morning while the FTSE is down 0.5%.

In the US, Dow are down about 45 points or 0.1%, while NASDAQ futures are up about 25 points or 0.2% as investors digest last week’s swings and look ahead to a busy week for corporate news. So far, Energy stocks have been in the spotlight. Over the weekend, Chevron announced that it has agreed to purchase Noble Energy for $5B in an all-share deal. This purchase suggests that some managements in the oil patch may be thinking the worst of the oil crisis has passed and are starting to look for opportunities. On the other hand, oilfield service giant Halliburton reminded investors that a lot of damage has already been done as it announced a $2.1B impairment charge. Although adjusted EPS was not as bad as feared ($0.05 vs -$0.11) revenues were still down 57% from a year ago.

Earnings season continues to ramp up this week headlined in the US by IBM tonight, Microsoft* plus Tesla on Wednesday and Amazon.com* on Thursday. Canadian earnings season gets underway this week headlined by Canadian National on Tuesday, Canadian Pacific, Rogers, Loblaw, and Suncor Energy Wednesday followed by Husky Energy, Cenovus and Teck Resources on Thursday.

The coming week is pretty light for economic news. Canadian retail sales are due on Tuesday with the main event being Friday’s flash PMI reports, the first look as July economic conditions in the US, UK and Germany. Investors may look to the flash numbers for signs of whether the initial reopening bounce has continued into the summer, if the rebound has slowed after an initial release of pent-up demand, if the recent rise in US cases has had any impact and any indications of what some of the longer-term implications of the COVID crisis may be.

*Shares of Amazon.com and Microsoft are held in some portfolios managed by SIA Wealth Management.

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