The new trading week finds equity markets around the world under pressure again. Asia Pacific trading saw the Hang Seng retreat while in Europe this morning, the Dax is down 0.4%, while the CAC is down 1.1% and the FTSE is closed for the Queen’s funeral. US index futures are down 0.8% to 1.0% adding to Friday’s losses of 0.5% to 0.9% for major US indices.
Investors’ focus for this week remains on monetary policy with four central banks meeting. More tightening is expected with the US 10-year treasury note yield breaking out this morning and rallying above 3.50% for the first time since 2008. This move has sparked another rally in the US Dollar which is up 0.7% against Gold and 0.3% against the Euro and the Canadian Dollar today. Commodities are also getting knocked back again with WTI crude oil down 2.8%, natural gas down 3.0% and copper down 0.8%.
The Fed meets on Wednesday with a 0.75% rate hike widely expected. Investors may also look to Fed member forecasts for indications of inflation expectations, how high the Fed Funds rate could go in the current hiking cycle and how long interest rates could potentially remain at higher levels.
On Thursday, the Swiss National Bank is expected to announce a 0.75% interest rate increase and take its benchmark rate back above 0.00% into positive territory for the first time since 2015. Also on Thursday, the Bank of England is expected to continue its series of 0.50% rate hikes and the Bank of Japan is expected to do nothing as usual.
In Canada this week, focus is on consumer and producer price inflation numbers. Outside of the Fed, the focus is on initial housing market data from both sides of the border, and earnings reports from some US homebuilders. In the wake of last week’s profit warning from FedEx, it appears that confession season has started earlier than usual, and investors may be on the lookout for potential dire warnings from other companies.
Chief Market Strategist Colin Cieszynski appeared on BNN Bloomberg today where he discussed tactical investing, sector rotation, relative strength and the Canadian Dollar.