The Bank of Montreal on its morning note this Monday noted that US stock futures had rallied across the board after stocks ended in negative territory last week while the greenback climbed higher. In the commodities space, WTI climbed over $ 70 and metals got stronger, with aluminum hitting $ 3,000 for the first time in 13 years.
BMO noted that it’s been a pretty busy week on the data front in Canada, although it’s quiet today. The highlights will be the CPI in August and home sales on Wednesday.
Global stocks were under pressure last week, with the Dow (-2.2%) and the S&P 500 (-1.7%) lagging behind. BMO said September was a tough month for stocks historically, and it has been so far. The Nikkei (+ 4.3%) and the CSI 300 (+ 3.5%) developed above average. The TSX was down 0.9%, bringing its year-to-date earnings down to 18.4%. All sectors were lower, with the exception of energy (+ 0.3%). Health care (-4.8%), basic materials (-2.6%) and industry (-2%) did the worst.
The loonie was hit hard last week, losing just over 1% to end near CAD 1.269, its weakest close since mid-August. A generally firmer US $ weighed on the C $, even though oil prices closed higher. With inflation reports on both sides of the border, BMO said they are likely to be the biggest sentiment driver this week for the loonie, which is starting the day a little firmer despite broader US dollar strength.
Canadian government bond yields were higher across the curve last week, with Friday’s strong employment report and supply contributing to this move. Long positions underperformed with returns 5 basis points, while 2 positions only gained a few basis points. Canadas fared worse than USTs by and large, with most of that move happening on Friday. There are two auctions this week: $ 4 billion 2-year (November 23) on Wednesday and $ 3 billion 30-year (December 53) on Thursday. The BoC’s buyback plan is as follows: Monday, 5-year sector, Tuesday, 10-year sector, Wednesday, 2-year sector and Thursday, 30-year sector.
Meanwhile, global stocks started Monday’s session on a solid basis this morning with no data to give direction to financial markets. In Europe, the rally was spread across all majors, from the DAX (+ 0.7% to the CAC 40 (+ 0.5%). In Asia, however, it was a different picture, where Chinese-based stocks led the declines (Hang Seng -1.5%), the Hang Seng China Enterprises Index -1.6%, CSI 300 -0.4%) as the government took further steps to limit the action of tech firms. The Nikkei (+ 0.2%) was a rare ray of hope, together with the S & P / ASX 200 (+ 0.3%). On the commodities front, all energy prices rose about 1% as aluminum hit the headlines after breaking the $ 3,000 mark, its highest level in 13 years, on its supply worries.
The USD index was stronger, with most majors falling against the greenback.