Chinese trade figures were not as bad as feared overnight, particularly on the export side, easing fears that recent stock market volatility could lead to an economic meltdown. Although China markets like Shanghai and Shenzen fell 2-4% the damage was contained to the mainland and it has become increasingly clear to traders that these declines are likely related more to market internals (the unwinding of last year’s big rally and changes to selling restrictions) than to economic fundamentals.
Meanwhile crude oil continues to attract support above the $30.00 level with WTI and Brent both up approximately 2% this morning in trading bounces. Another bigger than expected decline in US API inventories last night may also be helping. Oil and other energy commodities may remain active through the DOE inventory reports due mid-morning.
These two developments have helped to support relief rallies for depressed stock markets. The FTSE is up 1%, outperforming the Dow’s 0.6% and the Dax’s 0.3% gains to the upside. The FTSE appears to be benefitting from its higher weighting in energy stocks, which could bounce back along with crude, oil, a potentially positive sign for the S&P/TSX in Canada as well. A transaction between Corus Entertainment (TO:CJRb) and Shaw Communications (TO:SJRb) may also attract some attention particularly with Corus also posting a positive earnings report.
In currency action, the oil price rally is helping CAD/USD defend the $0.7000 round number with NOK and RUB also posting similar tentative gains. Capital coming back into risk markets like stocks and commodities has been leaving defensive havens. JPY has been weakening overnight while gold has been consolidating yesterday’s selloff. GBP continues to weaken with traders uncertain what may come out of tomorrow’s Bank of England meeting related to the timing of potential interest rate increases. Weaker sterling suggests growing speculation UK rate liftoff could be delayed.
It's a quieter day for US earnings but initial reports suggest that we may be seeing an emerging trend of positive results but weaker guidance for 2016. The higher USD has impacted corporate earnings in the US and it appears that the “earnings recession” could continue well into 2016. We should be able to get a better handle on this next week when reporting really ramps up.
Corporate News
Corus Entertainment: To acquire Shaw Media from Shaw Communications for $2.65B in a friendly cash and stock deal. Reports revenues $228M above street $218M
CSX (O:CSX): $0.48 vs street $0.46, 2016 EPS to decline from 2015 due to “negative global and industrial market trends”
Ford (N:F): $1B supplemental cash dividend, 2016 to be flat to up slightly over 2015
Economic News
Significant announcements released overnight include:
China trade balance $60.0B vs street $53.1B
China CNY exports 2.3% vs street (8.0%)
China USD exports (1.4%) vs street (8.0%)
China imports (7.6%) vs street (11.0%)
China new yuan loans street 700B
Sweden unemployment rate 4.2% vs street 4.1%
France consumer prices 0.2% vs street 0.1%
Eurozone industrial production 1.1% vs street 1.3%
Greece consumer prices (0.2%) vs street (0.5%)
NZ QV house prices 14.2% vs previous 15.0%
Upcoming significant announcements include:
1:00 pm GMT Poland trade balance street PLN 350M
8:30 am EST Canada Treanet house prices previous 6.1%
10:30 am EST US DOE crude oil inventory street 2.0 mmbbls
10:30 am EST US DOE gasoline inventory street 1.2 mmbbls
2:00 pm EST FOMC Beige book