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No data, no problem! New York session traders woke up on the right side of the bed this Monday, propping U.S. equities and the dollar significantly higher while sentiment improved. Crude oil and the positively-correlated Loonie also scored strong gains on talks of another OPEC deal extension.

  • Canadian housing starts up from 222K to 223K vs. 216K estimate
  • Hurricane Irma passes Florida, slows to a Category 1 storm
  • U.S. scales back sanctions on North Korea to avoid all-out oil embargo
  • North Korea: Harsher sanctions would make U.S. pay “due price”
  • Saudi Arabia energy minister met with Venezuelan and Kazakh counterparts to discuss longer OPEC deal extension

Major Events/Reports

Geopolitical risks fading?

Market participants had been bracing for the worst over the weekend, anticipating another set of missile tests from North Korea and more havoc from Hurricane Irma. However, U.S. markets started the week off on a good note as most of Florida was spared from potentially worse damage while the U.S. and North Korea dialed their threats down a notch.

The U.S. government revised its proposed sanctions on the hermit nation, capping petroleum and oil shipments instead of pushing for an all-out oil embargo. Washington also dropped the idea of enforcing a naval blockade and of freezing the assets of Kim Jong-un in hopes of getting the thumbs-up from China during the U.N. Security Council vote.

In response, North Korea’s foreign ministry stated that harsher sanctions will lead them to ensure that “the U.S. pays a due price.” In a statement published on the state-run Korean Central News Agency, the Ministry of Foreign Affairs also said:

“The forthcoming measures to be taken by the DPRK will cause the US the greatest pain and suffering it has ever gone through in its entire history.”

As of this writing, U.S. and North Korean officials are still holding informal talks in Switzerland. Although China and Russia think that sanctions are not necessary, the U.S. government remains hopeful that their watered-down version will not get vetoed by these nations.

U.S. stock indices up roughly 1%

The risk-on vibes from earlier trading sessions have carried on throughout the U.S. session, boosting equity indices up by nearly 1% for the day.

Analysts also attribute the strong market gains to anticipation for Apple’s product conference this week, with fans of The Fruit eagerly buzzing about what the new gadget offerings might have in store. Face-scanning unlock? 49384 x 2258 screen resolution? Embedded earphones? Whatever it may be, expectations are driving AAPL shares nearly 1.8% higher ahead of the event.

Equity traders are also keeping close tabs on tax reform developments as Treasury Secretary Mnuchin and Trump’s economic adviser Gary Cohn are heading for The Hill tomorrow to discuss budget proposals.

  • S&P 500 index is up 26.68 points to 2,488.11 (+1.08%)
  • Dow 30 index is up 259.58 points to 22,057.37 (+1.19%)
  • Nasdaq is up 72.07 points to 6,432.26 (+1.13%)

Potential OPEC deal extension

Crude oil is also in the green so far thanks to talks of an extension on the OPEC deal extension. Recall that the oil cartel already agreed to keep a cap on production six months longer than their original end-date to March 2018 in an effort to ensure that the commodity price stays supported.

Word through the pipeline is that Saudi Arabia’s energy minister Khalid al-Falih had a brief pow-wow with his counterparts in the U.A.E., Venezuela and Kazakhstan and that one of the topics on the table was another extension on their output cap deal.

Based on statements issued after their meeting, the countries considered extending production cuts “beyond the first quarter of 2018, if needed” and that an extension “may be considered in due course as fundamentals unfold.”

  • WTI crude oil is up 1.28% to $48.09 per barrel
  • Brent crude oil is down 0.07% to $53.74 per barrel

Precious metals, on the other hand, returned some of their recent gains as traders unwound their safe-haven holdings.

  • Gold is down 1.44% to $1,331.71 per troy ounce
  • Silver is down 1.63% to $17.828 per troy ounce

Major Market Mover(s):

CAD

The Loonie is already being supported by hawkish BOC expectations but it got another kick higher from expectations of another OPEC deal extension.

EUR/CAD is down from 1.4614 to 1.4484 (-0.99%), AUD/CAD fell from .9798 to a low of .9719 (-0.67%), NZD/CAD dropped to .8781 (-0.57%) and CAD/JPY popped up to 97.30 (+1.85%)

JPY

The yen slumped back in the losers’ bench as risk-on vibes were in play and traders cut down on their lower-yielding holdings.

USD/JPY is up from 108.21 to 109.46 (+1.52%), GBP/JPY is testing the resistance at 144.00 (+1.26%), AUD/JPY rallied from 87.18 to 87.83 (+1.14%), and NZD/JPY is up to 79.30 (+1.24%)

USD

The scrilla managed to catch a decent bounce for the day as concerns about Harvey and Irma took the backseat while U.S. officials tried to keep the spotlight on tax reform.

AUD/USD dipped from .8058 to .8026 (-0.36%), NZD/USD is holding steady around .7250 (-0.25%), USD/CHF climbed from .9469 to .9564 (+1.30%), and GBP/USD retreated to 1.3167 (-0.20%)

Watch Out For:

  • 2:30 am GMT: Australia NAB business confidence index (previous reading at 12)