Morning Minutes

Oil Rallies and Stocks Stabilize as Investors Await Payroll and Inflation Data




The continuing war in Ukraine and yesterday’s decision by OPEC+ to continue its supply restoration program (400,000 bbl/day per month) as is continues to underpin energy contracts. Today WTI crude is up another 3.1% and Brent Crude is trading above $115.00/bbl.

Stocks and currencies, on the other hand, appear to be stabilizing for the most part, indicating that the shock of war has been priced in for now pending new developments. US index futures are trading flat to up 0.2%. European markets do appear to be reflecting greater concern with the Euro down 0.4%, while the Dax and FTSE are both down about 0.6%.

Markets appear to be taking yesterday’s news from North American central bankers in stride. While both the Bank of Canada’s statement and Fed Chair Powell’s testimony recognized increased risks to their economies from the Ukraine war, at this point that doesn’t appear to be enough to derail their tightening plans, particularly with inflation so high. The Bank of Canada raised its benchmark rate by 0.25% to 0.50% as expected and for the first time, it openly discussed reducing its balance sheet (Quantitative Tightening) in tandem with future rate hikes. Fed Chair Powell suggested that an initial rate increase remains on the table for this month’s meeting and bigger increases at future meetings remain possible. Both Powell and Bank of Canada Governor Macklem are speaking again today so they may provide additional insight.  

Economic news continues to be dominated by employment and inflation reports. Service PMI reports are out from around the world today. The US number is due at 10:00 am EST and this time around investors may focus most on the prices paid component (street 83.0 vs previous 82.3). US factory orders are also due at 10:00 am (street 0.7% vs previous -0.4%).

Building on yesterday’s strong US ADP payrolls report, weekly US jobless claims have come in better than expected (215K vs street 225K), setting the stage for tomorrow’s US nonfarm payrolls report. For payrolls, the street is expecting 400K down from 467K last month. The average hourly earnings wage inflation report (street 5.8%) may also attract attention.

Canadian bank earnings week wraps up today on a positive note with TD Bank beating expectations on earnings ($2.08 vs street $2.04) and loan loss provisions ($72M vs street $261M).

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Colin Cieszynski, Chief Market Strategist

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

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