Exhausted sock markets are drifting back downward to finish the week. Banks and government offices are closed in Canada for Remembrance Day and in the US for Veterans Day. Because of this trading appears to be more subdued overall, but some interesting trends are still emerging.
US index futures are sliding in what looks like profit taking after the huge relief rally and Trump realignment seen this week. Nasdaq futures are down 1.0% S&P futures down 0.6% and Dow futures down 0.3%. This continues a trend of NASDAQ underperformance that emerged Thursday related to two factors. Capital has been moving back into old economy sectors related to infrastructure, fossil fuels and manufacturing which stand to attract increased support. While the new government may not be outright hostile to new economy sectors, they may not receive as much support (alternative energy) or could be impacted from a shift away from globalisation (information technology). Traders appear to be funding these moves into old economy areas by taking profits out of high value technology and momentum plays.
The other big realignment that continues to play out is a big shift in favour toward the UK and against continental Europe. Since the election GBP has soared while EUR has crashed. Because of this the outperformance of the FTSE relative to the Dax continues to unwind with the FTSE down 0.9% and the Dax up 0.4%. The forces that aligned to elect Donald Trump are the same as those who backed BrexitM this week's US vote confirmed that Brexit was not an isolated incident, it was the start of the policital pendulum starting to swing in a different direction. Britain is no longer as isolated in its thinking, and could find a like-minded friend in the US. The UK economy continues to perform well with construction output posting a surprise increase. Meanwhile moribund Europe looks increasingly at risk of being left in the dust and vulnerable to political shocks and risks of its own with Italy's referendum news month the EU's next big political test.
In other market action today, crude oil is down 1.6% as it sinks deeper into the lower half of a $40 to $50 trading range. This has already dragged on CAD and could weigh on energy stocks. Copper is up huge again soaring another 6% which could boost base metal miners.
Bond markets are closed today but generally speaking, prices are falling and yields rising as traders increasingly expect interest rates to rise. Yesterday three Fed speakers, including ultra-dove Bullard indicated a rate hike is likely coming in December. In general, with fiscal support coming to the US, which is expected to boost employment and inflation (see massive copper rally) the pressure on the Fed to do all the heavy lifting is fading and interest rates appear like to rise in the coming years. The big monetary stimulus cycle appears to be coming to an end.
Nvidia $0.94 vs street $0.56, sales $2.0B vs street $1.7B
Nordstrom $0.84 vs street $0.51 raised year guidance to $2.85-$2.95 from $2.60-$2.75
Germany consumer prices 0.8% as expected
UK construction output 0.2% vs street (0.4%)
NZ Business NZ PMI 55.2 vs previous 57.7
NZ food prices (0.8%) vs previous (0.9%)
Upcoming significant economic announcements include:
8:30 am EST FOMC Fischer speaking
10:50 am EST Bank of Canada Poloz speaking
10:00 am EST US consumer sentiment street 87.9
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