The latest data from Statistics Canada showed Canada’s GDP rose 0.4% in November topping estimates of 0.3%. This was the fifth increase in Canadian output in the last six months led by gains in manufacturing, mining, oil and gas.
The latest new home sales data showed that purchases of new homes in the US fell 10.4% in December to a 10-month low. Since the election the 30-year fixed mortgage rate went from 3.54% in November to 4.32% at the end of December which indicates rising rates are pushing out buyers.
In a recently published report Morgan Stanley highlights the massive and simultaneous drop in regional, cross-asset, individual stock and FX correlations, which is unusual and hasn’t been this severe in over a decade. The report notes "In just four months, we have gone from a market of unusually close linkages across markets, to one with usually divergent returns". This means different markets aren’t moving together depending on whether it’s risk-on or risk-off mode for investors.
Aside from the large “reflation trade” moves today the market consolidation since December has been characterized by reversion trades. The following chart from Strategas Research Partners shows the January performance of the best performing stocks in Q4. As can be seen the best stocks in Q4 are practically flat while the worst performing stocks are up roughly 2.8% so far.
Over the weekend OPEC confirmed compliance amongst its members for the production cut was running ahead of schedule. Of the planned 1.8 million barrels per day to be cut OPEC members have already managed to reduce production by 1.5 million barrels per day.
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