Crude oil is also climbing today with WTI rising 1.3% and Brent gaining 0.8%. Overnight reports suggest that US oil production fell again in December while demand increased. It appears US shale producers have started to respond to lower oil prices with reduced exploration unable to offset natural declines and perhaps some shut-ins. If this trend continues, the US market could start to move back toward balance which could help oil prices to stabilize and potentially recover a bit. That being said, it wouldn’t take much to resume exploration or turn on shut-in wells so the upside for oil remains limited to maybe $40 or $50.

 

Energy sensitive currencies mixed this morning, MXN and RUB have both gained over 1.0% on the oil rally while NOK is posting a more moderate 0.3% gain, while CAD (which has held up better in pullbacks) is pretty much flat against USD.

 

The oil rally could boost energy stocks today. In Canada a positive finish to bank earnings season from the Bank of Nova Scotia who beat the street and raised its dividend could kindle interest in financials. Valeant Pharmaceuticals may also be active again as the street continues to respond to management changes, the suspension of guidance and other developments this week keeping the company at the top of the news.   We may continue to see news reports come out from mineral exploration companies with the big PDAC convention in Canada continuing, a time when companies often put out assay results and try to make a big splash at the big show.

 

Manufacturing PMI reports have been mixed with China coming in below expectations. This plus rumours of coming mass layoffs in the millions for the government and the coal/steel sectors may have prompted yesterday’s stimulus move from the PBOC to support the country’s restructuring. Germany and Australia beat the street this month while the UK and Sweden fell well short of expectations.

 

There’s a lot of news on tap for North America today that could rock the markets. Monthly and quarterly GDP reports for Canada could influence trading in CAD as it may give a better idea of how the transition away from oil dependence back toward a more balanced economy between the twin WTI and CAD crashes of the last 18 months. It also may indicate how much, if any, pressure the Bank of Canada may be under to cut interest rates again.

In the US manufacturing PMI and construction spending reports are due mid-morning, with the street looking to see if yesterday’s big drop in Chicago PMI was for real or not given that indicator’s recent volatility. Results could influence speculation on whether the Fed will raise interest rates this month. Positive durable goods, inflation and GDP figures last week that put a March hike back on the table. Overnight, however, New York Fed President Dudley (one of the Fed’s Big 3 voters) took a dovish stance at a speech in China overnight suggesting the balance of risks has shifted to the downside. With the jury still out, we could see significant Fed speculation trading over the next few weeks. 

 

 

Corporate News

 

Bank of Nova Scotia                   $1.43 vs street $1.42, raised dividend $0.02 to $0.72

 

 

Economic News

 

Significant announcements released overnight include:

 

Australia RBA interest rate                     2.00% no change as expected

 

Germany unemployment change (10K) as expected vs previous (20K)

Germany unemployment rate                  6.2% as expected

Italy unemployment rate                         11.5% vs street 11.4%

Eurozone unemployment rate                  10.3% vs street 10.4%

 

Italy GDP                                              0.8% vs street 0.6%

 

Australia building approvals                     (15.5%) vs street (8.5%)

Australia commodity index                      (21.6%) vs previous (25.8%)

 

Japan unemployment rate                       3.2% vs street 3.3%

Japan Q4 capital spending                      8.5% vs street 8.7%

 

 

Manufacturing PMI reports:

 

 

China official                                          49.0 vs street 49.4

China official non-manufacturing              52.7 vs previous 53.5

China Caixin                                          48.0 vs street 48.4

 

Australia                                               53.5 vs previous 51.5

Japan Nikkei                                          50.1 vs previous 50.2

India Nikkei                                           51.1 unchanged

 

UK                                                        50.8 vs street 52.3

Germany                                               50.5 vs street 50.2

Sweden                                     51.7 vs street 55.0

Norway                                                 48.4 vs street 48.0

Poland                                                  52.8 vs street 50.6

Spain                                                    54.1 vs street 54.5

Italy                                                      52.2 vs street 52.3

France                                                  50.2 vs street 50.3

Greece                                                  48.4 vs previous 50.0

Russia                                                  49.3 vs street 49.5

 

Upcoming significant announcements include:

 

8:30 am EST                 Canada Q4 GDP                                    street 0.0% vs previous 2.3%

8:30 am EST                 Canada December GDP             street 0.0% vs previous 0.2%

 

10:00 am EST               US construction spending                       street 0.3%

 

 

Upcoming Manufacturing PMI reports:

 

9:30 am EST                 Canada                                                 previous 49.3

9:45 am EST                 US Markit                                              street 51.2

10:00 am EST               US ISM                                                 street 48.5

10:00 am EST               US ISM new orders                                previous 51.5