Morning Minutes 12/1/2020

Morning Minutes

Big Beats For Big Banks; OPEC+ Decision Delayed

December 1, 2020

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

The start of December finds stock markets around the world bouncing back and clawing back most or all of Monday’s losses. US index futures are up 0.9%-1.1% with a 1.1% gain for Dow Futures offsetting yesterday’s 0.9% decline for the Dow Industrials. Overseas, the FTSE has jumped 1.9%, while the Dax is up 1.0%, the Nikkei gained 1.3% and the Hang Seng rose 0.8%. Metals are also on the rebound today with Gold bouncing 1.7%, Silver popping 4.0%, and Copper climbing 1.3%.

Canadian bank earnings week has kicked off today with two reports that came in well above expectations. Bank of Montreal beat the street on EPS ($2.41 vs street $1.91) boosted by particularly strong performance at its Capital Markets division, with its Canadian and US personal & commercial banking businesses, plus Wealth Management showing sequential improvement. Loan loss provisions slowed to $0.43B this quarter from $1.05B last quarter. Bank of Nova Scotia also posted EPS that beat expectations ($1.45 vs street $1.22) helped by a rebound in international banking as Canadian banking struggled and the wealth management and markets showed improvement. Scotia reduced its loan loss provision to $1.13B from $2.18B last quarter.

Energy prices are slipping this morning with WTI crude oil down 0.4% and Brent crude down 0.3%. The OPEC+ meeting which had been planned for today to discuss slowing or postponing supply increases planned for January has been put off to Thursday. Yesterday’s OPEC meeting continues into today as cartel members struggle to agree among themselves over what to do before bringing in their external partners. Meanwhile ExxonMobil announced a $20B writedown of assets and plans to cut its capital spending program to $20-25B per year for the next five years from $35B annually.

Manufacturing PMI reports have been rolling out from around the world this morning, particularly Europe where the UK and France beat expectations but Germany and Italy missed expectations slightly. Canada manufacturing PMI is due at 9:30 am EST (street 55.8 vs previous 55.5.). The US ISM manufacturing PMI report is due at 10:00 am EST with investors expecting a headline reading of 58.0 down from last month’s 59.3 reading, which would be similar to yesterday’s Chicago PMI report (58.2 vs street 59.0 and previous 61.1). Investors may also monitor the forward-looking new orders component which is expected to slow from last month (street 53.4 vs previous 67.9).

US construction spending is also due at 10:00 am EDT with the street looking for a bounce from last month (street 0.8% vs previous 0.3%). Fed Chair Powell testifies to Congress this morning as well which investors may look to for comments on the economy and the outlook for monetary policy.

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