Canada’s -10.0% retail sales plunge in March matched expectations for a hefty pull-back amid the lockdowns in the second half of the month. It was the largest one month drop on record. But the ex-autos sales aggregate dipped just -0.4% in March, contrary to expectations for a pronounced drop. In February, total sales edged up 0.3% while the ex-autos aggregate was flat (0.0%). Record declines across a variety of sectors drove total sales values lower — there was a -35.6% tumble in motor vehicle and parts dealers sales, a -19.8% pull-back in gasoline station sales, a -51.3% free-fall in clothing sales and a -24.5% drop in furniture and home furnishing. However, food and beverage sales jumped 22.8% while general merchandise sales firmed 6.4%, as consumer buying patters shifted amid the lockdown. Statistics Canada estimates a -15.6% drop in total April sales, but we’d note that the worst of the pandemic driven contraction in activity across the economy looks to have been in April, with green shoots emerging in May as economies slowly reopen.

Canada

USDCAD rallied by over 0.5% in posting a high at 1.4035, a 4-day peak. The Canadian dollar, like other oil-correlating currencies, has been negatively impacted by a 6%-drop in oil prices today. July USOIL futures posted a four-day low at $30.74,down from Thursday’s $33.92 close., in what is now the biggest correction crude prices have seen since late April  The contract has since rallied over $32.50.

The move lower came as China said it will no longer offer a growth target in 2020. This has prompted speculation that China’s economy is in worse shape than expected, which has weighed on oil prices. The combination inventory draw downs in the US, along with global production cuts, and an improving demand picture with economies beginning to reopen, have seen WTI prices double since the start of May.

Overall, a flare up in geopolitical tensions between the US and China have hit oil and other commodity prices. Markets will be sharply focused on evolving US-China, and more broadly West-China, relations in light of Beijing’s plans to rescind its 50-year “one nation, two systems” agreement made with the UK at the handover of Hong Kong in 1997, which will quash democracy in the Special Administrative Region. Another focal point will be on opening economies following lockdowns, and how successful these are in not, or otherwise, sparking a second wave of coronavirus infections.

canada

canada

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

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