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Crude oil inventories for December 4 week 15.189M vs -1.035M estimate

Department of Energy inventory data for the week of December 4, 2020

  • Crude oil inventories surprise build of 15.189M vs. draw of -1.035M estimate
  • Gasoline inventories build 4.221M vs 2.000M estimate
  • Distillates inventories build 5.222M vs 0.900M estimate
  • OK Cushing crude inventories draw -1.364M vs -0.317M last week
Huge builds in the crude, gasoline and distillates. The price of crude oil is trading down $0.05 or -0.09% at $45.57. The high for the day reached $46.24.  The low extended to $45.33

Bank of Canada keeps rates unchanged as expected

Bank of Canada interest rate decision for December 2020

Statement from the Bank of Canada

The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week.

The rebound in the global and Canadian economies has unfolded largely as the Bank had anticipated in its October Monetary Policy Report (MPR). More recently, news on the development of effective vaccines is providing reassurance that the pandemic will end and more normal activities will resume, although the pace and breadth of the global rollout of vaccinations remain uncertain. Near term, new waves of infections are expected to set back recoveries in many parts of the world. Accommodative policy and financial conditions are continuing to provide support across most regions. Stronger demand is pushing up prices for most commodities, including oil. A broad-based decline in the US exchange rate has contributed to a further appreciation of the Canadian dollar.

In Canada, national accounts data for the third quarter were consistent with the Bank’s expectations of a sharp economic rebound following the precipitous decline in the second quarter. The labour market continues to recoup the jobs that were lost at the start of the pandemic, albeit at a slower pace. However, activity remains highly uneven across different sectors and groups of workers. Economic momentum heading into the fourth quarter appears to be stronger than was expected in October but, in recent weeks, record high cases of COVID-19 in many parts of Canada are forcing re-imposition of restrictions. This can be expected to weigh on growth in the first quarter of 2021 and contribute to a choppy trajectory until a vaccine is widely available. The federal government’s recently announced measures should help maintain business and household incomes during this second wave of the pandemic and support the recovery.

CPI inflation in October picked up to 0.7 percent, largely reflecting higher prices for fresh fruits and vegetables. While this suggests a slightly firmer track for inflation in the fourth quarter, the outlook for inflation remains in line with the October MPR projection. Measures of core inflation are all below 2 percent, and considerable economic slack is expected to continue to weigh on inflation for some time.

Canada’s economic recovery will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In our October projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway and will adjust it as required to help bring inflation back to target on a sustainable basis. We remain committed to providing the monetary policy stimulus needed to support the recovery and achieve the inflation objective.

UK’s Gove on Brexit: I hope we will get a trade deal

Not much has changed in the Brexit narrative for a trade agreement

The clock is ticking as we await Boris Johnson’s trip to Brussels, expected some time later today, in order to try and break the impasse in Brexit trade negotiations with European Commission president, Ursula von der Leyen.
The UK and EU reached a separate agreement “in principle” on the Northern Ireland border checks, which defeats the amendments of the Internal Market Bill.
That’s one positive at least but while the battle on that front is resolved, the war is still raging. As such, the pound still finds itself in the crossfire for the time being.

Nikkei 225 closes higher by 1.33% at 26,817.94

Japanese stocks rebound after slower start to the new week

Japanese stocks rebound after slower start to the new week
Asian equities are higher for the most part, with the risk mood seeing a more positive tilt ahead of European trading today. US stimulus hopes helped to feed some optimism into the market but even as that was quashed, it didn’t dent sentiment on the day.

 

The Hang Seng is up 0.9% while the Shanghai Composite is bucking the trend and trading down by 0.6% going into the closing stages.
Elsewhere, S&P 500 futures are up by 0.2% and 10-year Treasury yields are up 1.7 bps to 0.934% as we look towards the session ahead.
In the major currencies space, the dollar and yen are the weaker performers with the aussie and kiwi leading gains with AUD/USD near 0.7450 currently.

Jamie Dimon: I wouldn’t touch Treasuries at these rates with a 10-foot pole

Comments from the JPMorgan CEO

Comments from the JPMorgan CEO
  • Bank is over-reserved for base case economic scenario
  • Doesn’t see ‘earth shattering’ change to office work
  • Stimulus needed for unemployed and small business
  • Economic outlook is still ‘a little murky’
Who doesn’t want to lend the government money at 0.91% for 10 years at a time the Fed is dead-set on inflation and deficits are enormous?
Meanwhile, the consensus on the large bank reserves being released is that it will boost lending but I think that’s fanciful. For anyone creditworthy, money is cheap and easy. Dropping those reserves would be good for JPMorgan shareholders but I don’t know if there’s any significant economic knock-on effect.

NASDAQ/S&P close at record highs

All 3 major indices reach intraday all-time highs

The NASDAQ and S&P are each closing at record highs. All 3 major indices (NASDAQ, S&P, Dow) traded intraday to record highs. The Dow however, could not close at a record high.  PS the Russell 2000 closed at a record level as well.

The final numbers are showing
  • S&P index rose 10.24 points or 0.28% to 3702.20. The high price reached 3708.45. The low price extended to 3678.83
  • NASDAQ index rose 62.827 points or 0.5% to 12582.73. The high price reached 12594.53. The low price extended to 12453.20..
  • Dow industrial average rose 104.75 points or 0.35% to 30174.54. The high price reached 30246.22. The low price extended to 29972.07
Some of the big winners today included:
  • Rite Aid, +11.71%
  • US Steel, +11.51%
  • Rackspace, +9.64%
  • Chewy, +5.82%
  • Papa Murphy, +4.08%
  • AT&T, +3.95%
  • Crowdstrike Holdings, +3.94%
  • Pfizer, +3.15%
  • Nio ADR, +3.24%
  • Emerson, +2.78%
  • Beyond Meat, +2.77%
  • Exxon Mobil, +2.56%
  • American Airlines, +2.44%
Losers today included:
  • Booking, -2.05%
  • Nvidia, -1.89%
  • Whirlpool, -1.8%
  • Corsair, -1.65%
  • Uber technologies, -1.49%
  • Wells Fargo, -1.36%
  • Palantir, -1.35%
  • Southwest air, -1.27%
  • AMD, -1.22%
  • Walgreens, -1.06%
  • Twitter, -0.94%