Morning Minutes

Stocks Backslide as China GDP Growth Disappoints




Stock markets around the world have started the new trading week on their back feet, giving back some of Friday’s gains. US index futures are down 0.3%-0.4%, while in Europe, the Dax is down 0.6% and the FTSE is down 0.3%. Commodity action is mixed again today. In energy trading, WTI crude oil is up 1.7% and Brent Crude is trading above $85.00/bbl, while natural gas is down 1.6%. In metals action, copper is up 0.6% but platinum is down 1.0% and gold is down 0.4%.  

Stagflation has been the bogeyman for markets this month and today’s disappointing Chinese Q3 GDP growth report (4.9% vs street 5.2% and previous 7.9%) has added to fears of slowing economic growth in a period of high inflation. Weaker than expected Chinese industrial production (3.1% vs street 4.5% and previous 5.3%) doesn’t help matters either although stronger than expected Chinese retail sales does offset things a bit (4.4% vs street 3.3% and previous 2.5%).

Earnings season picks up again in earnest tomorrow, with Canadian companies joining in this week. In general, results are coming from a wider number of companies and sectors, but the main focus is on transportation companies, particularly railroads and airlines with investors looking for comments on how bad supply chain disruptions are, how long they could last and what is the impact of rising gasoline prices. Headliners this week include Netflix and CN Rail Tuesday, CP Rail, Halliburton, and Tesla Motors on Wednesday, Rogers Communications, IBM, and Intel Thursday, wrapping up with American Express, and American Airlines on Friday.   There’s only one earnings report of note today. Grocer Albertsons beat the street on earnings ($0.64 vs street $0.45) and raised its dividend by 20%.

It’s a quieter week for economic news. The People’s Bank of China meets tomorrow night with investors looking for commentary on whether Evergrande’s financial troubles are causing additional stresses and if the central bank is planning any measures to shore up its financial system. Inflation watch shifts to house prices on both sides of the border, plus Canadian consumer prices on Wednesday. Friday brings flash PMI numbers from around the world, the first peek at October economic conditions. Canada housing starts were slightly less than expected (251K vs street 255K).  US industrial production is due at 9:15 am today. (street 0.2%.)   

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Colin Cieszynski, Chief Market Strategist

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

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