Morning Minutes 10/26/2020

Morning Minutes

Sinking Stocks, Earnings and a Big Oil Deal In Focus

October 26, 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 in retreat to start the new trading week, weighed down by uncertainty over the potential for new full or targeted rollbacks/lockdowns as COVID cases continue to climb in several countries. US political uncertainty may also be having an impact on sentiment with the election a week from tomorrow, and stimulus talks still dragging on. Supreme Court uncertainty may fade with a confirmation vote expected as soon as today.

US Index futures are down 0.9% to 1.0%, giving back all of Friday’s gains and falling further. In Europe today, the DAX has plunged 2.6% after Germany IFO business survey results disappointed, while the FTSE is down a more moderate 0.4%.  Commodities are also under pressure today with WTI and Brent Crude Oil both falling about 2.25% and copper sliding 0.4%.

This morning brings news of a big merger in the struggling Canadian oil patch, with Cenovus Energy agreeing to purchase Husky Energy in an all-stock deal valued at $3.8B, a 21% premium to recent trading. The combined company is expected to become the third largest oil and gas producer in Canada. It’s a light day for corporate news in the US with the amin event being better than expected earnings from toymaker Hasbro ($1.88 vs street $1.63).

Although earnings season has paused for today, it could be seen as the calm before the storm as there are a ton of earnings reports on the way from big companies for the rest of the week. Tomorrow brings results from Microsoft*, Merck and Caterpillar, Wednesday is headlined by credit card companies Visa and MasterCard, plus Boeing. Thursday is a huge day for results including the Super Bowl of Big Tech numbers with Apple*, Alphabet (Google), Amazon.com*, and Facebook all reporting after the close that day. Friday features Big Oil results from Chevron and ExxonMobil.

Its also a busy week for earnings in Canada headlined by Restaurant Brands* on Tuesday, Suncor Energy on Wednesday, Shopify on Thursday and Imperial Oil on Friday.

In economic news, central banks take the spotlight with the Bank of Canada meeting on Wednesday, followed by the Bank of Japan and the European Central Bank on Thursday. While none of the banks are expected to make any major policy changes, commentary related to economic/financial conditions and the outlook may attract attention from investors.

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

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