The world of business and the markets has roared back to life this morning from the US Thanksgiving/Black Friday weekend with investors still considering the implications of a new COVID variant, and a busy week for business news on the way.
This morning’s market action can be framed in a “good news, bad news” situation. First the good news, after some follow-through selling in Asia Pacific markets overnight, European and North American markets have regained their footing this morning, along with crude oil. The bad news is that so far, today’s gains are smaller than Friday’s declines. For example, NASDAQ futures are up 0.8% today but the Index was down 2.2% on Friday. Dow futures are up 0.5% clawing back a small part of Friday’s 2.5% loss for the Dow. In Europe today, the FTSE is up 1.2% while the Dax is up 0.6%.
WTI crude oil is up 5.0% and trading back above $70.00/bbl in a big bounce but it was down over 10% on Friday. Natural Gas, which climbed on Friday, is down 7.5% this morning, trading near $5.00/mmbtu. In metals action, copper is bouncing back 1.6% and platinum is up 1.3%, while gold is up 0.3% but still trading below $1,800/oz.
Over the weekend, investors have been mulling over the implications over the COVID Omicron variant after several countries announced new travel restrictions. It remains unclear how severe or mild this variant may be and if or how well current vaccines and treatments may work against it.
The main weekend news, however, has been estimates of retail sales and mall traffic on what has historically been the busiest shopping days of the year in the US. On that note, the good news is that retail sales appear to have bounced back a bit with early estimates suggesting sales bouncing back after cratering last year, but the bad news was that sales remain well short of 2019, and there were a few reports of some online retailers selling out of some merchandise and missing opportunities. The movie business showed signs of life with a box office take of over $140M and perhaps more importantly, reports that high advance ticket demand for the Spider-Man movie coming next month crashed some ticketing websites.
It’s Cyber Monday, so investors’ focus for now may remain on retail sales and COVID but the arrival of December on Wednesday also brings a number of economic reports, particularly Manufacturing PMIs and US ADP payrolls on Wednesday, followed by Service PMIs and US nonfarm payrolls on Friday. In addition to the headline readings on economic activity, investors may also look closely at the inflation components (wages and prices paid), for signs of stagflation. Today, Bank of Canada Governor Macklem and Fed Chair Powell are speaking and Chinese PMI reports are on the way tonight.
In Canada it’s bank earnings week with the Big Six all scheduled to report results between Wednesday and Friday. In addition to the headline numbers, investors may be watching for news on dividends and buybacks. Earlier this month Canadian regulators gave permission to the large financial institutions to return more capital to shareholders and the insurers responded immediately with dividend increases and new buyback programs, while the banks held off, apparently waiting to combine the news with their regular earnings reporting, especially since this quarter is fiscal year-end for the banks.
