Morning Minutes 8/24/2020

Morning Minutes

COVID, Politics, Monetary Policy and Bank Earnings In Focus This Week

August 24, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

Please note that Morning Minutes will not be issued August 25-28 and will return on Monday August 31.

The new trading week is off to a strong start with US index futures up 0.9%-1.0%, including a 280-point gain for Dow Futures. Overseas, the Dax and FTSE are up 2.4% and 1.8% respectively, while Asia Pacific trading was led by a 1.75% gain for the Hang Seng. In commodity action, WTI crude oil is up 1.0% and copper is up 1.3%. Gold is up 0.5% and silver is up 0.9%.

Stocks have responded positively to weekend news that US President Trump and the FDA pushed through approval for the use of blood plasma from people who have recovered as a treatment for COVID-19. Meanwhile, the number of daily new cases in the US continues to decline. Press reports also suggest that a vaccine from AstraZeneca, which is up 3.8% in premarket trading, could be fast tracked.

It’s a big week for political developments. In Canada, the Conservative Party wrapped up its leadership contest announcing Erin O’Toole as the winner. In the US, the spotlight shifts from last week’s Democratic convention to the Republican convention which starts today and runs through Thursday, giving President Trump and his team an opportunity to outline their platform for the coming campaign.

Monetary policy direction may also attract attention. The Fed is holding its annual Jackson Hole conference, a forum which has been used in the past by the central bank for signalling intentions and changes to monetary policy. Fed Chair Powell and Bank of Canada Governor Macklem speak on Thursday.

It’s also Canadian Bank earnings week with results due from BMO plus Scotiabank Tuesday, RBC and National Bank on Wednesday, wrapping up with TD and CIBC on Thursday. This quarter includes results for May to July, which could show the impact of spring lockdowns and summer reopenings on the Canadian and in some cases the US economy. Considering what happened when US banks reported last month, the potential for strong trading results possibly offset by increases to loan loss provisions creating headline surprises exists. Because of this, investors may investigate results by division more than usual.

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