Morning Minutes 12/7/2020

Morning Minutes

Stocks Slide With Brexit and US Budget Negotiation Deadlines Looming

December 7, 2020

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

Monday finds world markets in moderate retreat, giving back some of last week’s big gains. Part of this may be normal backing and filling after several US indices including the Dow Industrials and the S&P 500 reached new all-time highs. Part of this may also be due to growing uncertainties out there including: increasing local/regional lockdowns in the US and Canada, UK-EU post-Brexit trade talks getting down to the wire ahead of a December 31 deadline, and US budget/stimulus talks continuing ahead of Friday’s deadline to avoid a government shutdown. It’s also the last week for President Trump’s legal challenges to the election results to get any traction or not with the Electoral College scheduled to vote a week from today.

In this environment, the FTSE is the only major index in the green up 0.4% but this can mainly be attributed to a 1.0% decline as investors reconsider the risks of what could happen if the UK enters 2021 without a new trade deal with the EU. US index futures are flat to down 0.3% this morning after US indices posted gains of 0.7%-0.9% on Friday. Overseas, the Dax is down 0.4%, while the Nikkei and Hang Seng fell 0.75% and 1.25% respectively.

It’s a lighter week for economic news and the biggest headliner is already out as China reported a stronger than expected trade surplus ($75.4B vs street $53.2B), boosted by stronger than expected growth in exports (21.1% vs street 12.0%).  The rest of the week is dominated by central banks with the Bank of Canada meeting on Wednesday followed by the European Central Bank on Thursday. While no changes to monetary policy are expected, investors may look to the central bankers for comments on the state of their economies heading into winter, assessments of the risks and opportunities out there, and any hints on future monetary policy trends.

Earnings season is now pretty much over and with the holidays approaching, the corporate news calendar is pretty light. A few Canadian retailers report this week including Dollarama and Roots on Wednesday followed by lululemon and Empire (Sobeys) on Thursday. In the US, Costco, Oracle and Broadcom report on Thursday.

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