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Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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NY Open: Wall Street opens with a bounce
Michael O’Neill
FX Trader, Loonieviews.net
Summary: New York opened with a bounce, although volatility remains elevated in the wake of Wednesday's equities plunge. In forex, we are watching USDCAD detach from WTI prices on the decline in WCS Canadian crude.
Wall Street opened in the green, a refreshing change following two days of nasty losses. As of 16:00 GMT, the Dow Jones Industrial Average (DJIA) is up 346.84 or 1.36 %, S&P 500 is up 1.62%, and the Nasdaq has gained 2.4%.
Equity bulls are breathing a sigh of relief, with some dismissing the two-day decline as merely a much-needed correction in an over-heated market. Others are not so sure. They point out that, at 3,516 days, this bull market is the longest in history. They note that the era of easy money is ending. Central banks in developed markets are raising interest rates or getting ready to raise them. Oil prices are rising, and a full-blown US/China trade war would greatly reduce the global growth outlook.
Pre-weekend profit-taking probably has a lot to do with today’s rally as does the improved risk tone. Sentiment improved on news President Trump, and China’s President Xi Jinping may meet at the Argentina G20 on November 30. So did rumours that the US Treasury Department did not find China to be manipulating its currency.
More good news came out of Europe with a Financial Times headline suggesting an imminent US/EU Brexit deal. JPMorgan Chase kicked off earnings season with a stellar Q3 earnings rise of 24%. Profit was $8.38 billion.
The US dollar added to its overnight gains in New York trading. EURUSD is the worst performing currency since the open having dropped from 1.1579 to 1.1535. So far, traders are ignoring the lower-than-expected Michigan Consumer Sentiment data. (Actual 99.0 versus a forecasted 100.1).
USDCAD continues to track broad US dollar moves. Price movements have decoupled (again) from WTI oil price moves. The decoupling is readily explainable. Canada’s main crude export, Western Canada Select (WCS) is trading at a discount of CAD 61.25 (as of October 10) to WTI.
Equity bulls are breathing a sigh of relief, with some dismissing the two-day decline as merely a much-needed correction in an over-heated market. Others are not so sure. They point out that, at 3,516 days, this bull market is the longest in history. They note that the era of easy money is ending. Central banks in developed markets are raising interest rates or getting ready to raise them. Oil prices are rising, and a full-blown US/China trade war would greatly reduce the global growth outlook.
Pre-weekend profit-taking probably has a lot to do with today’s rally as does the improved risk tone. Sentiment improved on news President Trump, and China’s President Xi Jinping may meet at the Argentina G20 on November 30. So did rumours that the US Treasury Department did not find China to be manipulating its currency.
More good news came out of Europe with a Financial Times headline suggesting an imminent US/EU Brexit deal. JPMorgan Chase kicked off earnings season with a stellar Q3 earnings rise of 24%. Profit was $8.38 billion.
The US dollar added to its overnight gains in New York trading. EURUSD is the worst performing currency since the open having dropped from 1.1579 to 1.1535. So far, traders are ignoring the lower-than-expected Michigan Consumer Sentiment data. (Actual 99.0 versus a forecasted 100.1).
USDCAD continues to track broad US dollar moves. Price movements have decoupled (again) from WTI oil price moves. The decoupling is readily explainable. Canada’s main crude export, Western Canada Select (WCS) is trading at a discount of CAD 61.25 (as of October 10) to WTI.
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