Morning Minutes

November Starts With Stock Markets Rising




Halloween didn’t spook investors in the slightest as November has arrived with stock markets around the world in rally mode. US index futures are all up about 0.5%, while overseas, the Nikkei soared 2.6%, the Dax is up 0.8% and the FTSE is up 0.5%. Metals are flat while energy contracts are mixed with WTI crude oil up 0.6% today and Natural Gas down 1.0%.

Over the weekend at the G-20 leaders’ summit, the US agreed with the EU to end tariffs on steel and aluminum sparking an 8.5% premarket rally for motorcycle maker Harley Davidson and a 1.4% premarket gain for US Steel. The political week begins with politicians posturing at the COP 26 climate change summit. With Russia and China’s leaders declining to attend in person, it’s hard to see how much will come out of that other than a lot of hot air.

There are two meetings of note this week that could have a larger impact on markets. First up is the US Fed monetary policy decision and statement due Wednesday afternoon. Investors are expecting the Fed to either announce the start of tapering, hint toward starting tapering at its next meeting in December, or punt tapering off to next year. The Euro dropped off late last week after the ECB went for Door #3. The Fed’s decision could impact multiple asset classes treasury yields, bonds, currencies and stocks. Any comments related to inflation or stagflation may also attract attention. Thursday brings an OPEC+ meeting where large producers are expected to shrug off calls to accelerate production restoration and maintain their current program of increasing production by 400,000 bbl/d every month.

The turn of the month brings a flurry of economic announcements this week, starting with PMI reports. Over the weekend, China reported disappointing Manufacturing (49.2 vs street 49.7) and Non-Manufacturing PMI (52.4 vs street 52.9). Canada Manufacturing PMI is due at 9:30 am EDT (street 57.2 vs previous 57.7). For more evidence of possible stagflation at 10:00 am EDT today, investors may compare US Manufacturing PMI (stret 60.5 vs previous 61.1), ISM New Orders (street 66.9 vs previous 66.7), and US construction spending (street 0.4% vs previous 0.0%) against ISM Prices Paid (street 78.5 vs previous 81.2).

Economic news continues through the week headlined by US ADP payrolls and Service PMI numbers on Wednesday, plus US nonfarm payrolls and Canada employment on Friday. There also could be other significant central bank announcements this week with the Reserve Bank of Australia meeting tonight and the Bank of England meeting on Thursday.

We also continue to work through the peak of earnings season with a flood of results coming from companies in the insurance, energy, mining, technology, consumer products, ride sharing, video game, travel booking, and other sectors.

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Colin Cieszynski, Chief Market Strategist

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

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