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CAD rises between election results and Bank of Canada decision, earnings move stocks

CMC Markets

Although major indices were flat for the most part, it’s been anything but a quiet day for world markets. Earnings reports, guidance and other corporate developments have had a big impact on trading in individual stocks. In the US, Harley-Davidson lost over 10% while IBM dropped over 5% following guidance cuts while SanDisk gained 5% on takeover rumours. Tesla Motors took a 10% dive after Consumer Reports pulled its “recommended” designation citing longer term hardware and software problems with the cars giving them a worse than average reliability score. In Canada, markets responded positively to Monday’s federal election results. The majority decision giving the Liberals a clear mandate to govern without anyone’s help/interference, and the collapse of the NDP (similar to Labour elsewhere) were seen as positive by the street, reducing uncertainty following a contest that looked too close to call back in the summer when the campaign started. Positive election sentiment and a rebound in the gold price which boosted gold stocks, enabled Canadian indices and CAD to post gains on a day that saw US indices and crude oil fall moderately, two factors that frequently would have meant a down day for Canada. Canada may remain in focus over the next 24 hours as the only really big economic news scheduled is tomorrow’s Bank of Canada decision and forecasts. So far this year, the Bank of Canada has cut interest rates twice in an attempt to mitigate the impact of the oil crash. Both cuts also followed on the heels of Norges Bank rate cuts. The Norwegian central bank recently cut rates for a third time in less than a year but this time around the Bank of Canada probably won’t follow suit because the meeting is too close to the election and because Canada’s economy has been showing signs of rebalancing. A rate cut or a clear signal of a possible cut in December would come as a surprise to the street, and could undercut the loonie’s recent gains. A neutral tone to the decision and statement could maintain support. The Bank of Canada’s economic forecasts later in the morning could give the street a second chance to evaluate the loonie’s prospects. It’s looking like a quiet day for Asia Pacific news. Because of this, traders may continue to react to the recent China GDP report and could respond to leading indicators for Australia or Japanese trade data. Corporate News Ferrari IPO priced at $52.00 per share Yahoo! $0.15 vs street $0.16, guides next Q sales ex TAC to $920-960M below street $1.08B, Chipotle Mexican Grill $4.59 vs street $4.62, same store sales 2.6% vs street 2.4% Celestica $0.30 vs street $0.31, guides next Q EPS to $0.27-$0.30 below street $0.32 Economic News Significant announcements released overnight include: US housing starts 1,206 vs street 1,142K US building permits 1,103 vs street 1,170K Upcoming significant economic announcements include: 10:00 am AEDT Australia conf board leading index previous 0.3% 10:30 am AEDT Australia Westpac leading index previous (0.3%) 10:50 am AEDT Japan trade balance street ¥87.0B 10:00 am EDT Canada interest rate 0.50% no change expected 10:30 am EDT US crude oil inventories street 3.75 mmbbls 10:30 am EDT US gasoline inventories street (1.0 mmbbls) 11:15 am EDT Bank of Canada Poloz economic forecast 12:00 pm EDT Former Fed Chair Bernanke speaking 1:30 pm EDT Fed Powell speaking

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