The Canadian dollar is under pressure from a rising dollar and falling oil prices. The Australian labor market remains resilient

At the end of Tuesday, the Dow Jones Index (US30) rose by 0.11%. The S&P 500 Index (US500) was up 0.02%. The NASDAQ Technology Index (US100) was down 0.16%. Stocks were trading mixed on Wednesday. Stocks were supported by dovish comments from Minneapolis Fed President Kashkari, who said inflation is moving in the right direction. However, the Nasdaq 100 Index closed lower due to weakness in shares of chip companies. Stocks also rose on comments from other Fed officials who supported gradual rate cuts. Dallas Fed President Logan said, “I anticipate the FOMC will most likely need more rate cuts to finish the journey,” but policymakers should “proceed cautiously” given the uncertainty over how restrictive monetary policy currently is. St. Louis Fed President Musalem also said, “Monetary policy is well positioned to return inflation to target and support maximum employment through gradual adjustments of the policy rate toward a neutral level over time, provided inflation continues to fall toward 2%.”

October US CPI rose by 0.3% m/m and 2.6% y/y, matching expectations. October CPI, excluding food and energy, was 3.3% y/y, which was in line with expectations. Markets are awaiting comments from Fed Chair Powell, who will speak on the economic outlook at an event at the FRB Dallas on Thursday. In addition, the retail sales report will be released on Friday to see if consumer spending is holding up. October retail sales are expected to rise by 0.3% m/m.

Pfizer (PFE) closed higher by more than 2% after CFRA upgraded the stock to “buy” from “hold” with a $30 price target. Spotify Technology (SPOT) closed with an upside of more than 11% after the company’s fourth quarter projected monthly active users totaled 665 million, beating the consensus estimate of 660.73 million. Shares of Caterpillar (CAT) closed down more than 1% after Evercore ISI downgraded the company’s stock with a $365 price target.

The Canadian dollar weakened to 1.4 per dollar, the lowest level since May 2020, amid a broader wave of US dollar buying, falling oil prices, and concerns about China’s economic growth. Proposed sanctions on US imports added to fears of lower demand for Canadian exports for its main trading partner. Foreign demand for the loonie declined amid falling oil prices and worsening demand prospects from the main importer, China, after disappointing economic data and stimulus measures. 

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 0.16%, France’s CAC 40 (FR40) closed down 0.14%, Spain’s IBEX 35 (ES35) lost 0.05%, and the UK’s FTSE 100 (UK100) closed plus 0.06%. Nagel, representative of the ECB Governing Council and President of the Bundesbank, noted that core inflation remains quite high, and prices are still under noticeable pressure, especially in the services sector. He added that President-elect Trump’s tariff plans could cost Germany 1% of GDP and cause an economic slowdown.

WTI crude oil prices fell to around $68 a barrel on Thursday after rising slightly in the previous session, driven by higher production estimates amid weak demand. The EIA raised its estimate for global oil production for 2024 to 102.6 million bpd from 102.5 million and for 2025 to 104.7 million bpd from 104.5 million after OPEC revised its growth prognoses downward, citing slowing demand from key consumers such as China.

Asian markets traded flat yesterday, with Japan’s Nikkei 225 (JP225) down 1.66%, China’s FTSE China A50 (CHA50) up 0.65%, Hong Kong’s Hang Seng (HK50) fell by 0.12%, and Australia’s ASX 200 (AU200) positive 0.44%. Stocks in Hong Kong lost 1.0% in Thursday morning trading, marking the fourth session of losses as all sectors retreated. The session marked the first time the city’s bourse remained fully open in the face of severe weather, breaking a tradition of closing during severe storms. 

The Australian dollar traded at its lowest level in three months as investors reacted to a mixed jobs report. The data showed Australia’s unemployment rate was unchanged at 4.1% in October for the third consecutive month, matching expectations. However, employment rose by only 15,900, below estimates of 25,000. Despite the data, it had little impact on the Reserve Bank of Australia’s monetary policy outlook. RBA Governor Michele Bullock confirmed that interest rates are quite restrictive and will remain at current levels until the Central Bank is confident that inflation is under control.