Morning Commentary: Reducing Risk Once Again

Foreign Exchange - Morning Commentary
Reducing Risk Once Again
Share this story:
Alan Rose
Alan Rose
Foreign Exchange Head Trader
U.S. equity and bond markets were closed yesterday to honor the passing of President George H.W. Bush, but the respite did little to change the tone or anxiety from what we witnessed on Tuesday when U.S. equities and interest rates collapsed along with interest rate inversion. Uncertainty, anxiety and angst are forcing investors and traders into cash or other perceived safe havens as markets are in full risk-off mode again today. The U.S. dollar remains on the sidelines relative to all the turmoil in equities and interest rates as investors and traders reduce risk and positioning.
Adding to the already existing tensions in the market from multiple sources was the arrest of the CFO of a key Chinese technology company in Canada (arrested by U.S. request) related to potential violations of U.S. sanctions on Iran. The arrest threatens to ramp up existing tensions between the U.S. and China that could prevent any meaningful progress on trade going forward raising another red flag for the markets.
Markets have clearly shifted from optimism to pessimism beginning in October. Markets are always looking forward and as more negatives appeared on the horizon, long equity positions began to cash out slowly at first until it became a stampede as the market is now pricing in weaker growth and a potential recession down the road. This too will play out at some time as investors will finally get to more balanced positioning, but in the short term, it would appear more equity liquidation is in store with ripple effects through all other asset classes.
  • Three pieces of U.S. economic data this morning have added to the woes of the market this morning. The ADP employment report (precursor to Friday’s Labor report) was weaker than expected with job gains of 179,000 against expectations of a gain of 195,000. The U.S. jobless claims were also higher for the fourth week in a row adding to concerns about the economy peaking.
  • The U.S. October Trade report showed the largest trade deficit since 2008 with the trade deficit with China the largest on record. The total trade deficit and the deficit with China will only add to continued White House pressure on China for rapid changes in trade.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Investment and Insurance Products:
Are Not insured by the FDIC or any other federal government agency
Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
May Lose Value
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. The Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2018 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?