Morning Minutes

Bank Earnings Begin Big Amid Broad Market Retreat




The Bank of Nova Scotia has kicked off Canadian bank earnings week with a strong start, beating the street on EPS ($2.10 vs street $1.91), raising its dividend by 11%, and launching a new 24 million share stock buyback program. Profits were boosted by particular strength in Canadian banking and a release of $96M in capital from loan loss provisions.

Good news from Canada has been overshadowed, however, by continuing uncertainty related to the COVD Omicron variant. At this point is remains unclear how severe or contagious this variant may be and how effective existing vaccines and treatments may be against it. Fed Chair Powell is scheduled to speak at 11:00 am EST today where he may offer more insight into the potential implications of a new COVID wave for the economy.

Today is also the last trading day of the month, a time when investors often reposition their portfolios. In this environment, stock markets have come under pressure again. US index futures are down between a 0.5% loss for NASDAQ futures and a 1.2% drop for Dow futures. Overseas, the Dax is down 1.2%, the FTSE is down 0.8% and the Hang Seng plus the Nikkei both dropped 1.6%.

The cautious turn in sentiment has sparked another flight to safety. Gold and the Japanese Yen are both up 0.5% today against the US Dollar, while the US Dollar is up 0.6% against the Euro and 0.3% against the Canadian Dollar. US bonds are also rallying, sending the US 10-year treasury note yield back under 1.50%. Commodities have come under pressure again today with WTI crude oil dropping 2.9%, natural gas plunging 6.0%, and copper dropping 0.5%.  

Canadian GDP bounced back staged a huge comeback Q3 (5.4% vs street 2.5% vs previous -1.1%) as the economy continued to reopen. Chinese manufacturing PMI reports were mixed with manufacturing PMI (50.1 vs street 49.6 and previous 49.2) improving, but non-manufacturing PMI (52.3 vs street 53.0 and previous 52.4) weakening slightly. US Chicago PMI is due at 9:45 am EST today (street 67.0 vs previous 68.4), leading into tomorrow’s manufacturing PMI reports from around the world.

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Colin Cieszynski, Chief Market Strategist

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

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