Morning Minutes 9/14/2020

Morning Minutes

Mergers, Oil and Central Banks in Focus This Week

September 14, 2020

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

Equity markets are climbing to start the new trading week with US index futures posting gains of 0.9% for the Dow, 1.2% for the S&P and 1.35% for the NASDAQ. These gains build on a positive start to the week for Asia Pacific markets where Tokyo, Hong Kong, Sydney and Shanghai all climbed 0.6%.

Merger announcements have been dominating the overnight news and boosting investor sentiment. Nvidia is up 5.5% in premarket trading after agreeing to buy fellow chipmaker Arm Holdings from Japan’s beleaguered Softbank in a $40B deal.  Oracle, meanwhile, is up 6.8% in premarket action after being chosen as the preferred suitor for the US TikTok social media platform, beating out Microsoft. Meanwhile in health care Gilead Sciences has agreed to purchase Immunomedics in a $21B deal.

Crude oil is in retreat again today with WTI down 0.6% and Brent down 0.5% as investors weigh supply and demand issues. Earlier today, OPEC revised its 2020 demand forecast down to 90.2 mmbbl/d from 90.6 mmbbl/d. The current forecast suggests a 9.5% decline in demand from last year. OPEC blamed weaker demand from emerging countries, particularly India for the downward change and also noted that demand fell less than expected in developed countries.

This disappointing demand news for energy comes at a prickly time for OPEC+ who are meeting on Thursday to discuss supply levels. Although no significant changes to quotas are expected, the organization does need to consider how to bring Libya back into the market with an export blockade winding down.

In addition to the OPEC+ meeting, its also a big week for central bank meetings with the Fed, Bank of Japan and Bank of England all announcing decisions between 2:00 pm EDT Wednesday and 7:00 am EDT Thursday. Although the Fed usually tries to avoid making any waves during election campaigns, investors may look to the statement and economic projections for insight into the health and outlook for the US economy. The dot plot is likely to be ignored with central banks around the world having indicated over the last several months that they intend to remain in stimulus mode for the foreseeable future.

Investors may also learn more about the recovery momentum in consumer spending with retail sales reports from the US, Canada, UK and China due out over the course of this week. It’s another light week for earnings with the main reports being FedEx and Adobe on Tuesday.

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