Morning Minutes

Stock Retreat Resumes as RBNZ Raises Rates




Although US indices were able to carry their rebound through the trading day to gains of 0.9% to 1.25% for US indices, on the back of a better-than-expected US ISM Services PMI report (61.9 vs street 60.0) that was as far as stocks were able to get. Overnight the bears have struck back with a vengeance driving the Dax down 2.0%, the FTSE down 1.6%, the Nikkei down 1.0% and the Hang Seng down 0.6%.

Investors appear to have been particularly rattled by the Reserve Bank of New Zealand’s decision to raise its benchmark interest rate to 0.50% from 0.25% overnight. The RBNZ had completed tapering back asset purchases a few months ago and by now becoming the first major central bank to raise rates, it appears to be showing a path toward ending emergency stimulus and normalizing monetary policy which other central banks like the Federal Reserve Board and the Bank of Canada may follow over the next year. This news appears to have renewed speculation that the Fed could be the next central bank to start tapering with the US dollar rallying 0.5% against the Euro and the Australian Dollar, and climbing 0.3% against Gold, the Canadian Dollar and the Pound.

This morning, US index futures have pretty much given back yesterday’s gains with declines of 1.0% for Dow futures and 1.2% for NASDAQ futures. WTI crude oil is down 1.1% but it still holding above its $77.50/bbl previous peak and breakout point. Natural gas is also in correction mode today down 4.4% but remains above $6.00/mmbtu ahead of tomorrow’s weekly storage report.     

Today’s economic news has been mixed. US ADP payrolls have come in stronger than expected (568K vs street 428K) but so far stocks have declined on the news suggesting that at least some investors see this as adding to the case for the Fed starting to taper before the end of this year. In Europe today both German factory orders (-7.7% over month vs street -2.1%) and UK Construction PMI (52.6 vs street 54.0) came in well below expectations.

SIA Wealth In The Media:

Chief Market Strategist Colin Cieszynski appeared as Guest Co-host on BNN Bloomberg’s The Street program this morning where he discussed the upcoming earnings season, tactical investing and relative strength.

Pepsi could be the canary in the coal mine of what we might expect for Q3 earnings: Colin Cieszynski

Colin Cieszynski, chief market strategist, SIA Wealth Management joins BNN Bloomberg to provide his outlook for Q3 earnings. He says, “Going forward, although the economy is improving, the outlook for earnings might not be quite as strong, we might be going from a strong rebound phase into something more moderate.”

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Colin Cieszynski, Chief Market Strategist

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

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