Morning Minutes

Stocks Climb on Good Economic News; Inflation in Focus This Week




Bouncing back from a mixed Friday, US index futures are in the green to start the new trading week with gains of 0.4%-0.6% for the three main contracts. European market action has also been positive this morning with the Dax up 0.7% and the FTSE up 0.5%. Gains for cryptocurrencies to the tune of 3.6% for Bitcoin and Ethereum suggest traders remain in “risk-on” mode.

Investors appear to be responding favorably to better than expected trade numbers from China announced over the weekend, with a bigger than expected surplus ($101B vs street $90B) boosted by stronger than expected export growth (18.0% vs street 15.0%).

The US 10-year treasury note yield is holding steady near 2.80% as investors mull over the implications of stronger than expected economic data such as the recent China trade and US nonfarm payrolls reports, for corporate earnings and monetary policy. Continuing a parade of hawkish Fed speakers over the last week, over the weekend Fed Governor Michelle Bowman indicated she expects rate hikes similar to the recent 0.75% increase to continue until inflation is declining in a “consistent, meaningful and lasting way”. The 30-year US treasury note yield has climbed back up above 3.00% on those comments.

Friday’s wage numbers for the US (5.2% vs street 4.9%) and Canada (5.4% vs street 5.5%) suggest that wage inflation remains high. This week, consumer and producer price inflation reports are due for the US which may indicate if inflation has paused, peaked or continues to rise. Commodity prices have been easing back lately which could potentially help. WTI crude oil is down 1.2% this morning and trading below $90.00/bbl, while natural gas is down 2.6%, and copper is down 0.25%.

US earnings season has moved into its later innings with this week‘s calendar dominated by small and mid cap companies, and Disney being the most notable large cap name reporting. Retailer earnings don’t start until next week In Canada, several large cap companies are scheduled to report results including Manulife Financial, Canadian Tire, Barrick Gold, Franco Nevada and Metro.

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Colin Cieszynski, Chief Market Strategist

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

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