Morning Minutes

A Short But Busy Week Starts With Stocks Sliding and Traded Rates Rising




With markets closed on Friday it’s a short trading week but one with a lot of potential news on the way. Three central banks meet this week, the Bank of Canada, the Reserve Bank of New Zealand and the European Central Bank. North American investors may watch the Bank of Canada most closely as a potential leading indicator of what the Fed may do next month in terms of whether interest rate hikes could be accelerated or if Quantitative Tightening could get underway. The RBNZ has been hawkish for some time so investors may see if they continue raising rates and investors may look to the ECB for signs of how the war in Ukraine, supply chain disruptions and rising inflation could impact central banks moving forward. Ahead of these decisions, the US 10-year treasury yield is on the rise again, climbing above 2.75%.

There also is a lot of potentially market-moving corporate news on the way. Earnings season kicks off in the US with several of the largest banks and brokerages scheduled to report results on Wednesday and Thursday. This morning, Shopify is up 1.8% in premarket trading on reports of a potential 10 for 1 stock split perhaps offset by a proposal to give the ecommerce company’s founder more voting power. Meanwhile Twitter is down 3.2% premarket on reports that Elon Musk has decided not to join the social media company’s board of directors after all.

The new trading week has started with stocks in retreat. Hong Kong and Shanghai plunged 3.0% and 2.6% overnight, while in Europe this morning, London and Frankfurt are down 0.6%-0.8%. Dow Futures are down 0.4% essentially giving back Friday’s gain, while NASDAQ futures are down 1.3%, adding to Friday’s 1.3% NASDAQ loss.   

Currency action is very mixed today. Cryptos are getting smashed with Bitcoin down 4.9% and Ethereum down 7.3%. These declines along with a 1.1% gain for Gold suggest a more defensive stance by investors, but on the other hand, the Japanese Yen is down 1.0%, perhaps a reflection of the Bank of Japan’s ongoing dovishness potentially becoming increasingly out of step with other central banks after this week’s meetings.

Commodities are under pressure again this morning, WTI and Brent crude oil are down 4.2%-4.5% this morning with WTI falling below $95.00/bbl. Gasoline is down 3.4% and copper is down 0.6%. Natural gas is bucking the trend with a 2.5% gain. It appears that recent COVID lockdowns in China has impacted investors’ attitude toward resources away from fears of supply disruptions/shortfalls toward fears of potentially falling demand.   

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Colin Cieszynski, Chief Market Strategist

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

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