Morning Minutes

China Trade, US Stimulus and Interest Rates In Focus

True Tactical SIA Wealth
True Tactical SIA Wealth



Stocks and commodities are mixed to start the new trading week. Dow Futures are flat, holding on to Friday’s 1.8% gain. Meanwhile NASDAQ futures have given back much of Friday’s 1.5% bounce, falling 1.0%. Overseas, European indices are up led by gains of 1.3% for Germany and 2.0% for Italy. Asia Pacific markets were under pressure overnight, particularly Hong Kong, which fell 1.9%.

Interestingly, Australia, a market similar in sector composition to Canada, gained 0.4%. As a resource exporting country, Australia appears to have benefitted from the very strong China trade numbers over the weekend. Bouncing back from the ravages of COVID a year ago, China posted an even stronger than expected rebound across the board with its trade balance ($103.2B vs street $60.0B), exports (60.6% vs street 38.9%) and imports (22.2% vs street 15.0%) all coming in well above expectations.

Surprisingly, the strong China trade numbers (which would normally be seen as positive indicator of resource demand) has not translated into higher commodity prices today. China-sensitive copper is down 1.2%, while WTI crude oil is down 0.5% as traders quickly shrugged off the impact of a drone attack on a Saudi energy facility over the weekend.

Weakness in commodities may be related to a rising US Dollar, which is up 0.6% against gold, and up 0.4% against the Euro. The greenback continues to catch a tailwind from another rise in the US 10-year treasury note yield which is trading up near 1.60% again today. Over the weekend the US Senate passed the widely anticipated $1.9 Trillion stimulus package, adding more fiscal support to the US economy, but potentially reducing the need for more monetary stimulus.

Interest rates around the world and the future of asset purchase programs may potentially be a topic of interest this week with the Bank of Canada meeting on Wednesday and the European Central Bank meeting on Thursday. Their comments on their economies and their monetary policy outlooks may give investors an indication of whether the easy money party which started nearly a year ago may be starting to wind down, potentially influencing sentiment toward stocks, commodities, bonds and currencies.

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Colin Cieszynski, Chief Market Strategist

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

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