Morning Minutes

Investors Stay Defensive While Waiting for Wednesday




Another winter weekend has come and gone, and stock markets have picked up where they left off Friday in full broad retreat. In early US trading, Dow futures are down 0.4% while NASDAQ futures are down nearly 0.9%, adding to Friday’s losses of 1.3% for the Dow and 2.7% for the NASDAQ. European bourses are getting pounded today as well with the Dax plunging 2.0% and the FTSE falling 1.3%. Commodities are also under pressure again with copper falling 1.9% and WTI crude oil slipping back under $85.00/bbl with a 0.2% loss.

Continued political tensions and fear of a war between Russia and Ukraine continue to capture the headlines, and particularly appears to be casting a cloud over European markets. Here in North America, this uncertainty seems to be adding to existing worries about inflation and interest rates. On Wednesday, both the Federal Reserve Board and the Bank of Canada are holding regularly scheduled monetary policy decision meetings. In both cases, central bankers are not expected to raise interest rates this time, but investors may look to statements and/or press conferences for hints of when interest rates may start to rise (perhaps as soon as March), and how many interest rate hikes could be on the way this year.

In this environment, capital continues to leave risk markets and flow into defensive havens. This can most clearly been seen with cryptocurrencies getting crushed (Bitcoin is down 4.75% while Ethereum is down 8.3%) while gold is up 0.5%, and the US Dollar is up 0.3%-0.5% against the Euro, Pound and Loonie.

Flash PMI reports, the first peek at the world economy in January are out this morning and results have been mixed. Germany showed improvement and beat expectations on both the manufacturing (60.5 vs street 57.0) and service (52.2 back above 50 into expansion territory vs street 48.0) sides, but the UK disappointed on both manufacturing (56.9 vs street 57.9) and service (53.3 vs street 55.0) sides. US Markit flash PMI reports are due at 9:45 am EDT today with the street expecting readings of 56.7 for manufacturing and 55.0 for services.  

Earnings season resumes today with results from oilfield services giant Halliburton ($0.36 vs street $0.34) and IBM is scheduled to report results after the close today. Highlights of the rest of the week include American Express on Tuesday, Microsoft, Tesla and Intel Wednesday, Apple and Visa Thursday and Caterpillar plus Chevron on Friday. Earnings season starts in Canada this week with the railroads reporting starting with Canadian National tomorrow.

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Colin Cieszynski, Chief Market Strategist

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

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