Morning Minutes 10/19/2020

Morning Minutes

Stocks Climb With China GDP, Deal Making and Earnings in Focus

October 19, 2020

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

The new trading week is off to a flat to slightly positive start so far as investors digest a number of weekend developments, much of which centers around progress (or lack of progress) around deal making across a number of fronts.

US index futures are up 0.6% to 1.0% this morning after House Chair Nancy Pelosi has set a Tuesday deadline for reaching a stimulus deal before the US election. Over in Europe, however, the Dax is down 0.2% and the FTSE is down 0.3% as the UK and EU remain at loggerheads over a new trade deal with the risk of a potentially disruptive No-Deal Brexit looming ahead. WTI and Brent Crude oil are flat today with WTI holding above $40.00/bbl ahead of an OPEC call where no major decisions are expected but producers could hint at their thoughts about what to do about supply levels in the coming months including how to bring Libya back into the market with a previous blockade having been lifted.

Asia Pacific trading saw mixed returns with Tokyo rallying 1.1% and Hong Kong gaining 0.6% but Shanghai falling 0.7%. Overnight China released mixed economic numbers headlined by its Q3 GDP growth of 4.9% over a year ago which was worse than the 5.2% growth the street had expected by an improvement on the previous quarter’s 3.2% growth rate. Monthly indicators came in better than expected including retail sales (3.3% vs street 1.8%) and industrial production (6.9% vs street 5.8%).

Corporate news today has been focused on earnings and attempts at deal making. Oilfield service giant Halliburton beat earnings expectations ($0.11 vs street $0.08). Keeping with the oil patch, ConocoPhillips announced a deal to purchase Concho Resources for $9.7B in stock. In communications, Altice USA increased its hostile takeover bid for Cogeco to $8.4B from $7.8B which has been rejected by Cogeco’s controlling shareholders. Under the proposed arrangement Altice would keep the US business and sell the Canadian operations to Rogers Communications.

Earnings season starts in Canada this week with the two big railroads reporting on Tuesday, Restaurant Brands on Wednesday and Rogers Communications, Canfor, and Constellation Software headlining Thursday. Earnings season broadens out this week with notable reporters including Netflix on Tuesday, Tesla Motors on Wednesday and Intel plus Amazon.com on Thursday.

It’s a light week for economic news with the main events being Canadian retail sales on Wednesday and Flash PMI reports, the first peek at October economic activity in the US and Europe, on Friday.

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