Is Canada the Biggest Trade Winner?

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What’s in Today’s Report:

  • Is Canada the Clear Winner from the New NAFTA?

S&P futures are decidedly lower while most international markets were down overnight thanks to Italian political/budget fears.

The 2.4% budget deficit Italy proposed to the EU was not well received yesterday and the mention of “Italy’s own currency” by a notable law maker overnight sent Italian bond yields to more than four year highs.

Meanwhile safe haven money flows are pushing Treasury and Bund yields lower and the dollar is up to fresh multi-week highs which will quickly become a headwind on US shares again in the near term.

Today, there are no notable US economic reports but there are two Fed speakers to watch: Quarles (10:00 a.m. ET), and more importantly Chair Powell (12:00 p.m. ET). Otherwise, focus will be on Europe and any developments with Italy’s budget or further discussions of Italy’s “own currency.”

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A Big Week for Economic Data (And It Needs to Be Good)

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What’s in Today’s Report:

  • Weekly Market Preview (All About Economic Data – And It Needs to Be Good)
  • Weekly Economic Cheat Sheet

Futures are modestly higher after the U.S. and Canada agreed on a new trade deal late Sunday night.

A new three way NAFTA deal is in place as Canada joined the U.S./Mexico trade framework, further reducing non-China trade uncertainty.  Notably, though, U.S./China relations deteriorated further as a security meeting between the U.S. and China was cancelled.

Economic data was disappointing as Chinese Sept. Manufacturing PMI fell to 50.8 vs. (E) 51.2, EU Manufacturing PMI slightly missed at 53.2 vs. (E) 53.3 and German Retail Sales dropped –0.1% vs. (E) 0.5%.

Today the key economic report is the September ISM Manufacturing PMI (E: 59.9).  That number needs to remain firm to help support stocks.

More broadly, while futures are higher on the U.S./Canada trade news, that’s unlikely to spur a sustainable rally for two reasons:  First, a U.S./Canada deal was always expected, so this isn’t a real surprise.  Second, the big trade wildcard, China, saw things get incrementally worse over the weekend with the cancellation of the security meeting.  Bottom line, I’ll be surprised and impressed if this early Canada related rally can hold throughout the day.

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