Despite a boost from a China GDP report that was not as bad as feared, stock markets in Europe and North America have been drifting lower today. This suggests that the rebound gains made by Chinese indices
over the last few weeks priced in expectations of an economy that is still struggling but not imploding as had been feared back in the summer.
For the most part, focus remains on corporate earnings which haven’t been all that great so far. Regional banks in the US have been doing well, a sign of a strong domestic economy. Companies with exposure to the higher USD, or struggling overseas economies like China have not been doing as well on earnings and guidance with Wal-Mart, Netflix and Mattel among the more notable strugglers last week. This week brings another big round of earnings led by industrial giants like Boeing, 3M and Caterpillar and a ton of tech companies like Google and MicroSoft, so today’s softness could be partly impacted by traders lowering their expectations.
Canadian markets may also attract attention over the next couple of days with the long awaited Federal election being held today. Final polls showed the Liberals leading, the Conservatives still hovering around 30% and the NDP trailing after much of the campaign had polls suggesting a three way dead heat. If the Liberals or Conservatives win enough seats to govern on their own markets are likely to take the result in stride. If the NDP ends up holding a significant balance of power position that would make them a significant player in a coalition, markets could react negatively due to their promise to walk away from the TPP trade deal.
So far today CAD is down slightly against USD but that can be explained as much by the falling WTI price as the election. The loonie is running in the middle of the pack among majors, so the street doesn’t seem to be expecting any major changes in policy direction after the vote. It still appears though that the Bank of Canada is unlikely to announce any rate changes with this week’s meeting coming so close to the election.
Hasbro $1.58 vs street $1.53
Halliburton $0.31 vs street $0.27, oilfield services market remains challenging
Significant announcements released overnight include:
China GDP 6.9% vs street 6.8%
China retail sales 10.9% vs street 10.8%
China industrial production 5.7% vs street 6.0%
China Bloomberg Sept GDP 6.55% vs previous 6.64%
UK Rightmove house prices 5.6% vs previous 6.4%
Poland retail sales 0.1% vs street 1.3%
Poland industrial output 4.1% vs street 4.0%
NZ service PMI 59.3 vs previous 58.2
Upcoming significant announcements include:
9:45 am EDT ECB weekly QE update
10:00 am EDT FOMC Brainard speaking
12:00 pm EDT FOMC Lacker speaking
Much later Canada federal election results
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