The Fed’s hawkish turn that sent USD and US stocks higher late yesterday has continued to have a big impact on trading overnight. The hawkish hold took many in the market by surprise, but for me, the decision came out pretty much in line with the key points I had called for in my Fed preview above: Clarify hawkish hold check Drop overseas risk concerns check Signal potential December hike check Stocks and USD would see hawkishness as a positive check US budget crisis would force Fed to hold now but should blow over by Dec check More hawkish dissenters nobody’s perfect With the US Congress on its way toward resolving the current debt limit and budget crisis after the deal passed the more contentious House last night, the path appears to be clear for the Fed to put through one rate increase right at the end of the year, following the 2013 pattern where a budget crisis and government shutdown forced the Fed to delay tapering from September to December. At this point, it would probably take a major dropoff in data to knock the Fed off course. Today’s Q3 GDP report was slightly below expectations but offset by stronger claims numbers so no change in expectations from today’s news. Yesterday’s Fed sparked a big spike up in USD and down for gold and other major currencies. Overnight, currency markets have stabilized with the USD at a higher level. CNH has also strengthened on reports that China is about to drop its one child policy and target a 6.5% growth rate for the next five years. The rebound also indicates that China fears continue to fade. Stock markets which after an initial drop, saw Fed confidence in the US economy as a positive for the corporate earnings outlook, have been consolidating at higher levels than they were trading at before the Fed statement. Crude oil has been building on yesterday’s big rally as yesterday’s DOE and FOMC news supported an improving US demand outlook. The big focus today is on earnings reports, particularly in Canada which have been very mixed. Gold companies saw a significant improvement in earnings as big cost cuts across the sector started to pay off. The oil sector was very mixed with some companies that cut early showing improvement and some still having work to do. Note that this could be the last hurrah for integrateds and refiners as the crude oil/gasoline spread has closed. In other earnings news, Potash and Methanex disappointed, Bombardier was a mixed bag of good and bad news, while Open Text beat the street. Today’s US session is likely to be dominated by FOMC and earnings reaction but we also may see positioning in JPY pairs ahead of tonight’s Bank of Japan meeting with the question of whether Japan’s central bank will increase stimulus or not still an open question. Corporate News Suncor Energy $0.28 vs street $0.18 Cenovus Energy $0.53 vs street $0.49, expects to reach cost cuts of $400M this year up from previous guidance of $280M Potash Corp $0.37 as expected, cuts full year guidance to $1.55-$1.65 from $1.75-$1.95 Barrick Gold $0.11 vs street $0.07, cuts cost guidance Agnico-Eagle $0.18 vs street $0.01 boosted by falling mining costs, cuts capex Newmont Mining $0.23 vs street $0.17, lower cost outlook for Asia Pacific and Africa mines Goldcorp $0.01 vs street $0.04, all in costs down 20% over a year ago Bombardier $0.00 vs street $0.03, CSeries 97% of testing done, $3.2 billion writedown on program, $1B investment from Québec government confirmed, reports circling TTC may be about to sue over late delivery of streetcars Methanex $0.26 vs street $0.47, sales $619M vs street $792M Open Text $0.84 vs street $0.78 Amgen $2.72 vs street $2.37, 27% dividend increase Aetna $1.90 vs street $1.76 ConocoPhillips ($0.38) vs street ($0.37) MasterCard $0.91 vs street $0.88 Tesoro Energy $6.48 vs street $6.08 Marathon Energy $1.76 vs street $1.82, 76% dividend cut, cutting capex by $0.2B to $2.2B Economic News Significant announcements released overnight include: NZ interest rate decision 2.75% no change expected US house vote on budget deal and suspension of debt ceiling until 2017 passes in a 266-167 house vote, deal now goes to Senate US Q3 GDP 1.5% vs street 1.6% and previous Q 3.9% US Q3 personal consumption 3.2% vs street 3.3% US Q3 core PCE inflation 1.3% vs street 1.4% vs previous 1.9% US initial jobless claims 260K vs street 265K US continuing claims 2.154K vs street 2,160K Canada industrial prices (0.3%) vs street (0.1%) Canada raw material prices 3.0% vs street 1.1% vs previous (6.6%) Germany unemployment change (5K) vs street (4K) Germany unemployment rate 6.4% as expected Germany consumer prices street 0.2% UK Nationwide house prices 3.9% vs street 3.8% UK CBI distributor sales 19 vs street 35 vs previous 49 Spain retail sales 4.3% vs street 3.0% Spain consumer prices (0.7%) vs street (0.6%) Sweden retail sales 3.7% vs street 3.0% Japan industrial production (0.9%) vs street (2.6%) Singapore unemployment rate 2.0% vs street 2.1% Upcoming significant announcements include: 9:10 am EDT FOMC Lockhart speaking 10:00 am EDT US pending home sales street 7.3% 10:30 am EDT US natural gas storage street 70 BCF CMC Markets is an execution only service provider. 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