Morning Minutes

Stocks Bounce Back as December Arrives and Bank Earnings Continue




The arrival of December has seen stock markets around the world rebound with end of the month selling pressure easing. Overseas, the Dax is up 1.8% and the FTSE is up 1.4%, while overnight, the Hang Seng rose 0.8% and the Nikkei climbed 0.4% in relief rallies. In the US this morning, NASDAQ futures are up 1.4% clawing back nearly all of yesterday’s 1.5% loss, but Dow futures, with a 1.0% gain, have only clawed back just over half of yesterday’s 1.9% retreat.

The flight of capital into defensive havens has eased overnight with the US Dollar, Japanese Yen and US bond prices backsliding, and gold still trading below $1,800/oz. Commodities are bouncing back today led by gains of 2.0% for platinum and 0.9% for copper. WTI crude oil is up 3.3% ahead of today’s OPEC meeting and tomorrow’s OPEC+ meeting where the groups are expected to consider accelerating, slowing or maintaining their current plans of increasing production by 0.4 mmbbls/day per month in light of political pressure from consuming countries, and the risk that new travel restrictions and a new COVID wave could curtail demand again.  

Canadian banks continue to roll out generally positive news this morning. National Bank beat expectations on earnings ($2.21 vs street $2.19), raised its dividend 23% and launched a 7 million share buyback program. Royal Bank disappointed on earnings ($2.71 vs street $2.81) but raised its dividend by 11% and launched a 45 million share buyback program. Today’s US results were more disappointing. Headliner is down 6.5% in premarket action after beating the street on earnings ($1.27 vs street $0.92) but missing on guidance ($0.73 vs street $0.81) for the current quarter.  

Today’s economic news has been mixed. US ADP payroll growth beat expectations slightly (534K vs street 525K). Overnight, the private China Caixin Manufacturing PMI report slipped back under 50 into contraction territory (49.9 vs street 50.5). European Manufacturing PMI reports mainly landed between 57.5 and 62.5 indicative of a general expansion.

More economic news is on the way today. Canadian manufacturing PMI is due at 9:30 am EST (street 59.1) and US construction spending at 10:00 (street 0.4% vs previous -0.5%). Fed Chair Powell continues his testimony to Congress today after rocking the markets yesterday with the US central bank may consider accelerating tapering at its next meeting. In that context, investors may look to today’s US ISM prices paid (street 85.5) and the Beige Book regional economic report, due at 2:00 pm EDT for updates on inflation and how much pressure the Fed is under to make another hawkish move.

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Colin Cieszynski, Chief Market Strategist

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

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