Morning Minutes

Crude Oil Soars on OPEC+ Speculation




October has arrived with mixed action across asset classes, but the big moves so far have been in energy markets where WTI crude oil is up 4.4% and natural gas is down 2.75%. Renewed interest in oil was ignited on press reports over the weekend speculating on the potential for a significant production cut of 1 million barrels a day or more when OPEC+ meets on Wednesday in order to shore up the market in a time of falling demand due to the sputtering global economy.

Stock market action has been mixed so far. US index futures are up 0.1% to 0.6% with Dow futures leading the bounce, as US equities try to claw back some of Friday’s 1.5%-1.7% US index losses. European indices are in the red again today with the Dax down 0.3% and the FTSE down 0.5%. Over the weekend the UK government walked back unpopular tax cuts for the highest earners.

The start of a new month brings the potential for significant news across a number of fronts. First it’s another big week for central bank meetings with the central banks of Australia and New Zealand both expected to announce 0.50% interest rate hikes over the next couple of days. There are a number of North America central bankers set to speak this week, including Bank of Canada Governor Macklem on Thursday plus several FOMC members, including four today and three tomorrow, with investors looking for any changes to the recent hawkish tone.

It is also a big week for economic news. Manufacturing PMI reports out this morning from Japan and Europe this morning have been below expectations, below 50 in contraction territory or both so far, indicating a weakening global economy. Canadian Manufacturing PMI is due at 9:30 am EDT (street 50.6 vs previous 48.7). The US ISM PMI report is due at 10:00 am with headline Manufacturing PMI (street 51.8 unchanged) and prices paid (street 51.9) of particular interest to investors. US construction spending for August (street -0.3%) is also due mid-morning. Later this week, Service PMI, employment and wage inflation numbers are due.

The arrival of a new quarter also brings the start of confession season where companies may potentially announce profit warnings ahead of earnings season which picks up in the second half of the month. With the impact of overseas economic problems, rising inventories, and a soaring US Dollar already causing warnings last month, investors may be on the lookout to see if we get more warnings than usual this time around.

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Colin Cieszynski, Chief Market Strategist

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

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