For the most part, world markets have stabilized overnight to digest yesterday's US election related takedown and await more polls. Dow and S&P futures are up slightly. Nasdaq futures are down 0.2% after Facebook warned its revenue growth is likely to slow going forward and that advertisings role as a growth driver is likely to diminish, talk that is usually an omen of doom for high flying and high valued momentum stocks. Overseas the FTSE is down 0.4%, the Dax
is flat and the Hang Seng closed down 0.6% with Japan closed for a holiday. Crude oil stabilized with WTI holding $45.00.
Currency market action shows the US Dollar continuing to weaken as Donald Trump gains in the polls. The Fed held rates steady yesterday and signalled toward a December rate increase. Although the number of hawkish dissenters dropped to 2 from 3 that was no big deal because the vote was driven more by political factors than economic factors. The decision suggests that the Fed still expects Clinton to win or that the reaction to a Trump win would be small and short (a complacent Fed could be in for a surprise on several counts, especially if the vote is close).
The biggest action today has been in GBP which is staging a big rally this morning. A UK High Court ruled that the government cannot unilaterally invoke Article 50 without a vote in Parliament, Traders saw this as potentially slowing or stalling the Brexit process sending Sterling up sharply and dragging on the FTSE, unwinding some of the trend that has dominated since the vote. This case is set now to go to the UK Supreme Court with hearings possible in early December.
The Bank of England maintained interest rates and QE at its meeting today in a 9-0 vote. Sterling has a second stage rally underway on the news as the tone from the central bank came out less hawkish that many had expected. The MPC indicated that it has limited tolerance for above market inflation (ie don’t expect unlimited stimulus), it dropped any suggestions of another rate cut this year, indicted that monetary policy can respond in either direction to changes in the economy and raised its 2016 GDP forecast to 2.2%. Governor Carney appears to have finally recognized that the UK economy is doing a lot better than he thought it would when he overreacted and hit the panic button last summer. Today UK Service PMI exceeded expectations building on yesterday's positive Construction PMI report.
In Canada today on top of the usual broad influences like US market action, energy and metal prices, earnings reports could influence trading is specific companies and sectors. It's a big day for results north of the border. Canadian Natural and EnCana beat the street by a country mile, suggesting that the energy sector may finally be turning the corner. SNC Lavalin and Magna International both reported earnings well above expectations continuing a trend of generally positive earnings for Canadian companies this quarter. BCE was in-line while Gildan and Enbridge missed.
We also could see positioning ahead of Friday's US and Canadian employment reports, and trading around US service PMI and factory orders reports.
Facebook $1.09 vs street $0.97, sales $7.01B vs street $6.92B, company expects advertising revenue growth to slow and 2017 to be an investment year
Qualcomm $1.28 vs street $1.13, guides next Q EPS to $1.12-$1.22 vs street $1.22
Canadian Natural CFPS $0.92 vs street $0.57
EnCana CFPS $0.29 vs street $0.22
Magna International $1.29 vs street $1.20
BCE $0.91 as expected
EnBridge $0.47 vs street $0.51
SNC Lavalin $0.16 vs street $0.12
NZ ANZ commodity prices 0.7% vs previous 5.1%
Australia trade balance ($1.2B) vs street ($1.7B)
Spain unemployment 44K vs street 77K
Service PMI reports:
China Caixin 52.4 vs previous 52.0
Australia 50.5 vs previous 48.9
Singapore 50.5 vs previous 52.9
India 54.5 vs previous 52.0
UK 54.5 vs street 52.5
Sweden 57.6 vs street 56.5
Upcoming significant economic announcements include:
12:00 pm GMT Bank of England decision 0.50% and QE £435B no changes expected
8:30 am EDT US jobless claims street 256K
10:00 am EDT US factory orders street 0.2%
10:30 am EDT US natural gas street 57 BCF
Upcoming Service PMI reports:
9:45 am EDT US Markit street 54.8B
10:00 am EDT US ISM PMI street 56.0
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