ON DECK FOR MONDAY, NOVEMBER 2nd
KEY POINTS:
- Oil down on pre-election headline manipulation
- Canada-US trade talks back on track…
- …but we’ve heard that before
- German retail sales plunge
- Chile’s economy super-accelerated
- US to refresh ISM-mfrg, construction spending
- Canada to update little-watched manufacturing PMI
- RBA to hike again tonight
- Global Week Ahead — Checks and Balances (reminder here)
The dominant factor across markets this morning is ongoing manipulation of the energy market. Oil is down by nearly $5 on speculation that Trump is seeking a diplomatic solution with Iran. Who’s driving that speculation? The Trump administration, the day before Americans who haven’t mailed it in already show up to vote. Most other signs point to post-midterms escalation in what in another entry on the list of intractable conflicts.
Bonds are sceptical. US Treasury yields are little changed. European yields are down by up to 5bps mostly outside of bunds. Equities are gently higher across NA futures and European cash.
Data risk was light overnight and we’ll get a few nuggets out of the US and Canada later on this morning. German retail sales volumes plunged -2% m/m in September, reversing the prior 1.2% gain and then some. Chile’s economy super-accelerated in September, given this morning’s GDP proxy that grew by 1.9% m/m SA.
Otherwise, here’s what we face today which is merely passing the time before tomorrow’s US midterms:
- US ISM-manufacturing for October is due out at 10amET. Moderate growth is expected to continue alongside very high price pressures.
- US construction spending during September faces a high hurdle to post another gain after a strong 1% rise in August (10amET).
- Canada’s manufacturing sector is registering mild growth with October’s little-watched S&P manufacturing PMI due out (9:30amET).
They’re talking again. Canadian PM Carney and Trump spoke over the weekend, and both sides acknowledged progress in trade talks. Be cautious. Trump sounded more optimistic in saying they’re close to a great deal. Carney said they were working toward a possible deal over coming weeks. Trump is obviously motivated by his vote tomorrow. Trump likely wants his signature on a new trade deal which means if it’s a fairly comprehensive CUSMA 2.0 deal, then get it through Congress before the Democrats control at least one of the chambers come January. Canada holds leverage over US politics in that sense. We’ve heard all this before, and the difference would have to be Trump exerting control over Lutnick this time after he played spoiler in the final hours of talks in August.
In an ideal world for the Carney administration, a passable deal could be struck in time for six by-elections that the PM called over the weekend and to be held on December 7th.
Australia’s central bank is widely expected to hike again later on this evening (10:30pmET). CPI recently surprised a touch on the upside and remains too warm even before the full consequences of recently rising oil prices and further upside arrive. Governor Bullock warned in recent parliamentary testimony about materializing upside risks to inflation, while accompanying officials warned that the latest inflation readings were too high and hotter than expected in their August outlook. Hawkish guidance was therefore generally supportive of hike pricing for tonight.
And last, thank you to the National Post for this shout out on our rate call as Scotiabank Economics was the only one to get it right on the Bank of Canada long in advance straight back to last November. Most other media outlets were too busy denying that rates could ever go up and gave little to no airtime for the hawkish case which was a disservice to their readers. There is a long history of Scotiabank Economics outperforming consensus on Canadian rates that goes back to the Global Financial Crisis and its aftermath and throughout the pandemic.
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