February 8, 2018, 7:10 am EST
Stock markets around the world continued to drift lower overnight. Most of the moves downward have been relatively moderate and contained within emerging ranges. The Hang Seng, however, was hit particularly hard, falling 1.3%, while the Chinese Yuan tumbled relative to other currencies. Sentiment turned against China overnight after the country reported a trade surplus of $20.3B way short of the $54.1B surplus the street had been expecting. Export growth of 11.1% was above expectations but more than offset by a 36.9% spike in imports. Weak China trade numbers have also dragged on commodity prices this morning sending both WTI crude oil and copper down 0.7%. The impact of this news, however, has not hit resource currencies in a meaningful way.
Stocks and currencies are still facing headwinds from a recovering US Dollar, boosted by rising interest rates. The US 30-year treasury yield broke out again yesterday, rising to 3.12% on anticipation that the Powell led Fed will continue to raise interest rates and could accelerate hikes. Yesterday’s neutral comments from the RBNZ also position the Fed as one of the more hawkish central banks, New Zealand’s central bank was dovish on inflation indicating it doesn’t expect inflation to reach its 2.0% target until 2020 pushing it out two years. The RBNZ indicated is has no plans to change interest rates but clearly is leaning neutral to dovish.
Sterling is soaring this morning with a lot of news out from the Bank of England. The MPC maintained its 0.5% interest rate this time but the pound popped a penny on anticipation of further rate increases this year. GBP pairs may remain active through Governor Carney’s press conference at 7:30 am EST.
Its another big day for earnings reports with communications, technology and insurers dominating the headlines once again. In Canada, results are due from BCE, Telus, Great West Lifeco, Sierra Wireless, Canada Goose, and Domtar. In the US numbers are due from Twitter, Lions Gate, Viacom and Nvidia.
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