Stock markets around the world continue to climb this morning particularly in Europe where the FTSE and the Dax are both up 1.5% and Italy's FTSEMIB is up 1.2%. US index futures are slightly positive still trading near all-time highs.
Crude oil is also steady today with Tuesday's normal trading correction quickly fading. Late in the day a 2.2 mmbbl drop in US API inventories helped to shore up support once again as it indicates the market situation in the US continues to improve with or without any OPEC deal. Oil may remain active through Wednesday’s DOE reports and through Saturdays meeting between OPEC and non-OPEC producers to nail down non-OPEC production cuts.
The Loonie has also paused overnight as traders await the Bank of Canada’s latest interest rate decision which is due mid-morning. The decision and statement could have a significant impact on trading in CAD and Canadian stocks today.
The Bank of Canada is the only central bank of the major resource exporting countries that hasn’t cut interest rates this year. Even though the street is not expecting a cut, lingering speculation the Bank of Canada could go dovish just before the Fed goes hawkish and likely raises US rates next week has been weighing on CAD. In the last week, the loonie has underperformed crude oil because of this risk.
Truth is, the Canadian economy did rebound in Q3 as shown by the recent strong GDP report. In addition Canadian bank earnings were strong and employment growth has exceeded expectations the last two months indicating Canada’s rebound momentum has continued into the fall and can continue to ramp up with oil prices rising and the service sector expanding. So it looks like the central bank will likely maintain interest rates. A neutral to positive tone in the statement comments about the Canadian economy’s direction could take the lid off the loonie, while a cautious to negative tone could keep the pressure on.
This morning India’s central bank held its benchmark interest rate when a cut had been expected indicating that globally the monetary policy pendulum is shifting from stimulus toward normalization.
Trading in Europe today may remain active ahead of tomorrow's ECB meeting where the central bank is expected to announce plans for what to do about its QE program which is scheduled to end in March. Also in focus is continuing talk about a potential bailout of some kins for Italy's banks reminding traders some things need to be done regardless of who is in charge politically.
In currency markets, GBP has slipped back a bit following disappointing industrial and manufacturing reports for the UK. Gold continues to stabilise and appears to be base building as the recent US Dollar rally comes to an end.
There have been no major corporate announcements this morning.
India RBI repurchase rate 6.25% unchanged street had been expecting a 0.25% cut
US API crude oil inventories (2.2 mmbbls)
UK Halifax house prices 6.0% as expected
UK industrial production street 0.5%
Norway industrial production 0.7% vs previous (12.4%)
Australia construction PMI 46.6 vs previous 45.9
Australia Q3 GDP 1.8% vs street 2.5% vs previous 3.3%
Upcoming significant economic announcements include:
10:00 am EST Canada interest rate 0.50% no change expected
10:30 m EST US DOE crude oil inventories street (1.5 mmbbls)
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