Equity market momentum continues to change. After finishing last week strong, US indices treaded water for the first two days of this week but now have started to backslide with US index futures falling 0.25% to 0.50% this morning. Overseas, the Dax is up 0.25% but the FTSE is down 0.7% and in Asia Pacific trading overnight, Hong Kong and Shanghai fell 1.5% and 1.9% respectively.
The US 10-year treasury note yield is holding steady just above 4.25%. The Reserve Bank of New Zealand, which has been the most hawkish central bank this cycle, downshifted its tone overnight from hawkish to neutral, ending previous forecasts that had called for additional interest rate increases but also indicating that its fight against inflation is not over and that it has no plans to cut interest rates any time soon. Three Fed officials are speaking today.
US Q4 annualized GDP was revised down slightly to 3.2%, while the quarterly Core PCE inflation component, the Fed’s preferred measure, was revised up slightly to 2.1%, which can be seen as another sign of stagflation. US mortgage applications fell for the third week in a row, with four of the last five weeks now negative. Tomorrow brings Canadian GDP, US monthly Core PCE inflation, Chicago PMI, US pending home sales and weekly US jobless claims.
Canadian bank earnings week got off to a mixed start yesterday with Bank of Montreal falling 3.7% and Bank of Nova Scotia climbing 3.2%. Today, Royal Bank of Canada ($2.85 vs street $2.79) and National Bank of Canada ($2.59 vs street $2.36), both beat analyst expectations on earnings, boosted by interest income on traditional lending, but both banks raised their loan loss provisions and RBC joined other banks in indicating that Capital Markets and Wealth Management results were soft in the quarter despite significant equity market gains over that period.
Cryptocurrencies are soaring again today with Bitcoin up 5.7% and Ethereum up 3.1% but they appear to be one of the last areas of the market still in rally mode along with the small cap Russell 2000 which gained 1.3% yesterday. Energy trading is mixed with US Crude Oil down 0.2% and Natural Gas up 1.8%, bouncing back from Tuesday’s selloff. Metals are in retreat with Platinum down 1.3%, Copper down 0.4% and Gold down 0.1%.