Oil and NASDAQ rebound as initial Trump effect fades and OPEC speculation resumes
It’s been a tumultuous week for the markets since the US election. Reaction to the Trump win surprised many in the market (but not me who called it) sparked a number of major moves and substantial capital flows across markets as traders tried to sort out who could be the winners and losers under the new administration. It appears that traders are nearly finished repositioning and many of the big moves of the last week appear to have run their course with consolidations and, in some cases, corrections starting.
For example, stock markets which had advanced to new highs like the Dow and the Russell 2000 have paused enabling the S&P 500 and particularly the NASDAQ to catch up a bit. Corrections also appear to be underway within indices. Financials, which had been rallying since the election, had a correction today while other interest sensitive sectors like utilities and telecom which had been under pressure bounced back.
The top performing sector today was energy stocks in both sides of the border which benefitted from a massive 4.6% rally in oil prices which took WTI back up above $45.00. OPEC countries appear to be starting to take negotiations more seriously now that the big November 30 OPEC meeting is only two weeks away. Rising WTI also sparked rallies on oil sensitive currencies, particularly RUB, MXN, NOK and CAD. Gains in energy and materials propelled the resource weighted Canadian market to a solid 0.8% gain on the day outpacing its US peers to the upside.
US retail sales and Empire Manufacturing beat the street keeping the Fed on track toward a December rate hike with the street now pricing in a 94% chance of one into Fed Funds trading. With the US Dollar Index trading up at 100.00, the street appears to be pricing in estimates for 3-4 hikes over the next year up from 2 before the election. So far this week, Fed speakers have been neutral to hawkish indicating that increased fiscal stimulus could enable the Fed to normalize rates faster. Wednesday brings another three speakers with Chair Yellen speaking Thursday. A ton of Fed speakers this week could keep currency and bond trading active.
Asia Pacific currencies including JPY, CNH and NZD remain under pressure while AUD and SGD appear to be stabilizing. Fed speculation could keep these markets active today with the only data due from Australia (wage inflation). Australia stock action could be divided between higher energy prices and weaker metal prices.
Looking farther ahead, GBP and UK stocks could be active around the UK employment report. US DOE inventories could keep the pot boiling in energy markets and traders may watch US producer prices for confirmation the upstream inflation pressures building that we saw in today’s UK inflation report.
There have been no major announcements after the US close today
Significant announcements released overnight include:
US API crude oil inventories 3.65 mmbbls
US Empire manufacturing 1.5 vs street (2.5)
US retail sales 0.8% vs street 0.6%
US retail ex auto 0.8% vs street 0.5%
Canada Teranet house prices 11.8% vs previous 11.7%
Canada existing home sales 2.4% vs previous 0.8%
UK consumer prices 0.9% vs street 1.1%
UK core CPI 1.2% vs street 1.4%
UK retail prices 2.0% vs street 2.3%
UK producer input prices 12.2% vs street 9.3%
UK producer output prices 2.1% vs street 1.8%
UK house prices 7.7% vs street 8.1%
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)
11:30 am AEDT Australia wage price index street 2.0%
9:30 am GMT UK jobless claims street 2K
9:30 am GMT UK 3m employment change street 91K vs street 106K
9:30 am GMT UK average weekly earnings street 2.4%
9:30 am GMT UK 3m unemployment rate street 4.9%
3:45 am EST FOMC Bullard speaking
7:45 am EST FOMC Kashkari speaking
5:30 pm EST FOMC Harker speaking
8:30 am EST US producer prices street 1.2% vs previous 0.7%
8:30 am EST US core PPI street 1.6% vs previous 1.2%
9:15 am EST US industrial production street 0.2%
9:15 am EST US manufacturing production street 0.3%
10:30 am EST US DOE crude oil inventories street 1.0 mmbbls
10:30 am EST US DOE gasoline inventories street (1 1 mmbbls)