Traders continued to applaud Friday’s nonfarm payrolls report as a sign of a strong US economy and positive prospects for corporate earnings sending the S&P to a new all-time high, the Dow to its high for 20.6 and the Nasdaq Composite to a test of the 5,000 level.
European markets also rallied to start the week. The FTSE
climbed 1.4% after Angela Leadsom dropped out of the race for Conservative leader paving the way for Theresa May, as the last contender standing, to become the next PM of the UK. While some Brexit uncertainty remains, at least knowing who is going to be in charge has been seen as a positive step which enables the government to start preparing for Brexit and other trade negotiations (hints were dropped over the weekend UK may be looking for deal with the US and Canada plus China to start). Meanwhile, other parties remain in disarray with a leadership challenge underway at Labour and UKIP looking for a new leader.
The NASDAQ rally indicates that the focus on big macro concerns following the Brexit vote is fading and interest is starting to return to risk markets and momentum plays. Meanwhile, the focus of traders has started to turn back toward individual stocks and sectors over big macro moves, a trend that may continue over the next couple of weeks. The spotlight is on the aerospace sector for example with the Farnborough Air Show underway. Order flow this year has been light so far with orders mainly coming for single aisle Boeing 737s and Airbus A320s from airlines in China and India, with Virgin placing an A350 order. The show closed early for the day after a big storm so we may hear more results overnight and tomorrow.
Bombardier's is also attracting attention, soaring 5% on the news that its CSeries 300 has been certified in Canada with deliveries to start in Q4. Traders will be watching for the company to build on its big CSeries wins with Air Canada and Delta earlier this year but it’s hard to say if some of the new interest reported to be out there could come together in time to be announced at Farnborough or not. Orders for smaller business jets and turboprops often come later in the show so Bombardier and Embraer may be in the news as well over the next few days.
CAD is under pressure from a 1.4% drop in oil prices with WTI breaking $45.00 earlier today. Returning oil sands production running into pipeline constraints has been blamed for the decline but this seems like an empty excuse to me as traders have known production was going to come back for weeks. US drill rigs were up again Friday but a seasonal rebound happens nearly every summer and the overall level of exploration remains low.
Alcoa gained 2.8% ahead of today’s earnings report which came in way above expectations while Freeport rallied 5.3%. Base metal companies have attracted renewed interest with copper climbing again ahead of China data due later this week. Canadian metal miners like Fitst Quantum and Teck also rallied so we could see the Australian mining sector attract attention today as well.
Tesla Motors gained 4% after founder Elon Musk tweeted that he is working on a new Top Secret Masterplan with more details expected later in the week.
Outside of Alcoa, it’s a pretty slow day for news but we may see traders spend Tuesday preparing for a ton of big announcements later in the week including Bank of England and Bank of Canada meetings, US big bank earnings, China data including trade and GDP reports and US retail sales plus more Fed speakers reacting to last week’s big nonfarm payrolls report.
Alcoa $0.15 vs street $0.09, expecting improved business in second half and a strong 2017
Significant announcements released overnight include:
Canada housing starts 218K vs street 189K
Norway consumer prices 3.7% vs street 3.2%
Italy industrial production (0.6%) vs street 1.1%
Greece industrial production 2.9% vs previous 2.8%
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
9:50 am AEST Japan producer prices street (4.2%)
12:00 am BST UK same store sales previous 0.5%
7:00 am BST Germany consumer prices street 0.3%
8:30 am BST Sweden consumer prices street 1.0%
9:15 am EDT FOMC Tarullo speaking
9:35 am EDT FOMC Bullard speaking
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