Morning Minutes

China Lockdowns, Black Friday Results and Canadian Bank Earnings Preview




US investors return from the Thanksgiving weekend today to find stocks and commodities in retreat. With a rise in protests over the weekend, the impact of China’s latest wave of lockdowns on the domestic and global economy, including the demand for resources has attracted increased investor scrutiny. The Hang Seng fell 1.5% overnight compared with a 0.4% dip for the Nikkei. This morning in Europe, the Dax is down 0.9% and the FTSE is down 0.3%. Commodities are also under pressure on demand concerns with WTI crude oil down 2.8%, Natural Gas down 5.1%, and Copper down 0.6%.

Coming off of an indecisive Friday that saw the Dow gain 0.5% and the NASDAQ lose 0.5%, US index futures are decisively in the red this morning with NASDAQ and S&P futures both down 0.7% and Dow futures down 0.5%. Adobe reported that online sales over the US Thanksgiving shopping weekend increased by 2.3% from last year to a record $9.1B. That sounds promising until we consider that the US consumer price index was last reported at 7.7%, which means that sales were down on an inflation adjusted basis. Adobe also indicated that “Buy now, pay later” sales surged, raising questions about the health of consumers’ finances.

Today has otherwise been quiet for economic news which picks up as the week progresses headlined by US ADP payrolls on Wednesday, Manufacturing PMI on Thursday and US Nonfarm Payrolls plus Canada jobs on Friday. When looking at employment numbers investors may also continue to keep a close watch on wage inflation figures alongside the headline job reports.

Fall earnings season wraps up this week with Canada’s Big Six banks scheduled to report results between Tuesday and Thursday with several areas of concern for investors. First although the overall Canadian economy has continued to muddle along, housing data has continued to weaken raising concerns about bank’s real estate exposure and what that could mean for loan loss provisions. Note that loan loss provisions started to creep back upward at several US banks when they reported results last month. Second, although equity and bond market conditions have improved in November, the August to October quarter, which these results cover, was very choppy and challenging for equity and bond markets which could impact results from capital market and wealth management operations.

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Colin Cieszynski, Chief Market Strategist

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

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