Oil challenges $50 barrier, NOK and CAD rally. Brexit debate not hurting UK economy or markets

More overnight gains for crude oil find both WTI and Brent trading this morning within a few pennies of the big $50.00 round number hurdle. Upbeat talk about the US economy from the Fed implying a positive demand outlook and falling US stockpiles continue to support oil’s recovery. On the supply side, more disruptions in Nigeria may be offset by news that Suncor Energy expects all of its operations to be back up and running by the end of June. This aligns with yesterday’s Bank of Canada comments that it expects the Canadian economy to rebound in Q3 as oil sands productions resumes and the reconstruction of Fort McMurray begins. Energy sensitive currencies like CAD and NOK are the top performers so far today with USDCAD falling back under $1.3000, and energy stocks may capture significant attention today as well.

More overnight gains for crude oil find both WTI and Brent trading this morning within a few pennies of the big $50.00 round number hurdle. Upbeat talk about the US economy from the Fed implying a positive demand outlook and falling US stockpiles continue to support oil’s recovery. On the supply side, more disruptions in Nigeria may be offset by news that Suncor Energy expects all of its operations to be back up and running by the end of June. This aligns with yesterday’s Bank of Canada comments that it expects the Canadian economy to rebound in Q3 as oil sands productions resumes and the reconstruction of Fort McMurray begins. Energy sensitive currencies like CAD and NOK are the top performers so far today with USDCAD falling back under $1.3000, and energy stocks may capture significant attention today as well.

Asia Pacific indices played catch up overnight with the Nikkei rising as the G-7 summit got underway in Japan. European and US indices are rising at a slower pace while digesting recent gains with the FTSE up 0.25% the Dax up 0.50% and US index futures up 0.1%.  

Stock traders may focus on the banking sector again today with three of Canada’s biggest banks posting strong results for the quarter which ended in April. CIBC, RBC and TD all posted earnings well above street estimates, especially CIBC which also raised its dividend. Energy stocks may also attract quite a bit of attention today with the oil price rising.

Sterling is steady against USD today as it bumps into technical resistance but it remains well supported even though news flow over the last 24 hours has favoured the Leave side. A BMG online poll today shows Leave leading slightly confirming polls yesterday that showed Leave tied or leading. Meanwhile the UK GDP update shows that despite speculation from some quarters, the Brexit debate has not had a big negative impact on the UK economy. Headline UK GDP growth and the consumer side of the economy have held up quite well in fact. The one soft spot was in business investment but even there the decline was not as bad as previously thought. Trading action in GBP and the FTSE indicates that fears among traders of a negative impact from a close race or a Leave decision continues to fade and the chorus of doom is increasingly ignored.

Fed interest rate speculation could move US markets again today with this morning’s durable goods report set to give more colour on the state of the US economy. Later this morning comments from FOMC Governor Jerome Powell, could attract significant attention as he is a permanent voter who doesn’t speak in public very often.  

Corporate News

CIBC        $2.40 vs street $2.32, 2.5% dividend increase

TD Bank        $1.20 vs street $1.17, revenues $8.2B vs street $7.8B

Royal Bank of Canada    $1.66 vs street $1.64, credit loss provision $460M above street $420M, income from Canadian banking, wealth management, insurance and capital markets all above expectations.


Economic News

Significant announcements released overnight include:

UK GDP update                2.0% vs street 2.1%
UK private consumption            0.7% vs street 0.5%
UK total business investment vs quarter    (0.5%) vs previous (2.0%)
UK total business investment vs yr ago    (0.4%) vs previous 3.0%

Spain GDP                3.4% as expected
Sweden consumer confidence        96.0 vs street 98.0
Sweden producer prices            (4.2%) vs previous (3.7%)
Sweden trade balance            SEK 4.4B vs street SEK 2.5B
Italy retail sales                2.2% vs previous 2.7%

Singapore industrial production        2.9% vs street (0.2%)


Announcements due later today include:

8:30 am EDT        US durable goods orders        street 0.5%
8:30 am EDT        US durables ex transport        street 0.3%
8:30 am EDT        US jobless claims            street 275K

10:00 am EDT        US pending home sales            street 0.1%

12:00 pm EDT        FOMC Powell speaking


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