In addition to the continuing reaction to U.S. Fed Chair Janet Yellen’s hawkish comments yesterday, there were a number of announcements related to specific companies overnight that could spark trading action today, particularly in the aerospace sector.
Last night the U.S. Commerce Department slapped a 219% tariff on the sales of Bombardier (TO:BBDb) C-Series jets in the U.S., siding with Boeing (NYSE:BA) in a trade dispute. So far, the company had won one order with Delta, which Boeing didn't bid on. The dispute-resolution process could drag on for several months yet, but traders may see this as a setback for Bombardier and its suppliers and a win for Boeing. The Canadian government cancelled a military jet order with Boeing over the dispute, and it has the potential to spill over into the bigger NAFTA renegotiation talks going on this week.
In other news, Nike (NYSE:NKE) fell in aftermarket trading last night. Although the sports gear producer beat the street on earnings, it warned in guidance on slowing North American sales (a victim of the collapsing U.S. retail sector) and on shrinking margins.
Yellen hinted toward another interest rate hike in December yesterday. She downplayed recent softness in inflation as transitory, and indicated the Fed should not wait for inflation to reach 2% to raise rates further. She indicated uncertainty about inflation calls for a continuing program of gradual rate hikes. Atlanta Fed President Raphael Bostic was even more clearly hawkish, indicating if he were a voter this year, he would support a December rate hike if data keeps coming in as expected. This news has boosted the U.S. dollar, particularly against JPY and CHF.
Fed speakers continue today, but the central bank spotlight shifts to Bank of Canada Governor Stephen Poloz’s lunchtime speech and press conference. Last week, Deputy Governor Timothy Lane hinted that the bank could go on hold to assess the impact of a higher loonie, the two recent rate hikes and NAFTA negotiations again. The street will be looking to Poloz for confirmation or rejection of Lane’s assessment and hints on whether the BoC is done raising rates for 2017 or not.
Toward the end of the North American trading day, the Reserve Bank of New Zealand’s latest interest rate decision is due (4 p.m. EDT). The RBNZ is expected to keep its benchmark OCR steady at 1.75%. A rate hike looks particularly unlikely in the wake of recent worse than expected New Zealand trade numbers and post-election uncertainty. It remains to be seen if Governor Graeme Wheeler will try to aggressively talk down the kiwi dollar again considering it has been falling lately already.
WTI crude oil is trading down slightly overnight, while gasoline is down 1.0% this morning. Late yesterday, API inventories showed that hurricane disruptions have ended with oil stockpiles falling 0.7 mmbbls, and distillates dropping 4.5 mmbbls, while gasoline rose 1.4 mmbbls. Energy commodities may remain active through today’s DOE reports. Oil sensitive currencies, like NOK, RUB and MXN, have been tumbling overnight with CAD down less than that group so far.
U.S. markets also could see some interest today around durable goods orders. The Republicans are expected to announce their tax reform plan which may also attract attention.