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Dow Blazes Off Its Lows as China Sends Trump a Huge Trade Delegation

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The Trump administration blindsided the Dow Jones on Tuesday with the decision to blacklist 28 Chinese companies for their involvement in human rights abuse issues in the Xinjiang region.

China’s retort further hit the stock market as they lowered expectations for trade talks by cutting their planned stay short. However, the Dow recovered from its lows as the sheer scale of the Chinese trade delegation raised hopes for some progress.

The Federal Reserve also pitched in with some dovish commentary.

Dow Jones Falls as Trump Applies Maximum Pressure on China

The Dow Jones Industrial Average was the best performing of the major US indices on Tuesday, as both the Nasdaq and S&P 500 fell more than 0.5%

At last check, the Dow was down 73.26 points or 0.28% at 26,404.76. The DJIA had plunged as low as 26,139.80 earlier in the session.

The Dow blazed back from its lows during the afternoon session. | Source: Yahoo Finance

Commodity markets saw sharp weakness in crude oil on global growth fears and ongoing trade war angst. Gold and silver continue to enjoy market volatility, with XAG/USD – the primary beneficiary – rising over 1.6%.

Further pressure on the stock market came in the form of a surging US dollar. The catalyst for this was a senior aide to UK PM Boris Johnson saying a Brexit deal now looks impossible after a call with German leader Angela Merkel. This sent both the British pound and euro lower and boosted the DXY.

Trump Pressures Stock Market & China with Blacklisting

Donald Trump’s decision to announce the blacklisting of Chinese companies right before critical trade talks can only be described as a tactical decision. This last-minute squeeze, on the face of it, may have hurt negotiations since China reacted negatively, but applying maximum pressure on Beijing is likely part of a longer-term strategy

A weak Caixin Services PMI shows the Chinese probably want some kind of limited deal soon, as the size of their trade delegation demonstrates.

Last week, top Trump economic advisor Larry Kudlow hinted at a positive surprise, and the Dow looks to be clinging to this optimism. On the other hand, it’s worth noting that Bloomberg’s report on the US limiting inflows to Chinese equities may have been correct after all, even if the administration cried fake news at the time.

Adding further complications, the NBA drama continues to rumble on in the background.

Federal Reserve Hawks Remain a Threat to Dow Jones

Another factor helping keep the Dow Jones afloat is the expectation of plenty of easing from the Federal Reserve.

While a dovish Fed has been priced in, Senior Economist Bill Diviney at ABM AMRO believes there is still a major risk of hawkish rebellion in the FOMC. Voting hawks Eric Rosengren and Esther George are refusing to give ground, as the analyst writes:

“We have for some time expected a weakening in incoming data to drive the Fed to cut at both meetings [October & December]. However, it looks as though it will take more to convince hawks on the Committee of the need for further cuts, based on commentary at the weekend from Boston Fed president Rosengren and Kansas Fed president George. Both are voting members this year, and both dissented against the recent cuts by the Fed.”

Providing context for their outlook, Diviney pinpointed the following two comments as evidence of these two members’ reluctance to vote for more easing:

“George downplayed the undershoot of the Fed’s target as ‘by itself, not a compelling justification for providing additional monetary policy accommodation’. Rosengren meanwhile focused on the relative strength of consumption.”

Dow bulls are longing for two more rate cuts this year and would almost certainly throw a bearish tantrum if Powell doesn’t deliver over the next few months.

On Tuesday, Powell revealed that the Fed plans to begin expanding its balance sheet “soon,” which appeared to lift US stocks in late afternoon trading.

Dow Stocks: Caterpillar Crashes, Boeing Defies Bears

It was a fragile day for the Dow 30, as China woes hit most of the big players hard.

Caterpillar stock, widely used as a trade war barometer, dove more than 1% as global growth concerns mounted.

Dow Inc. and Cisco were the worst hit; they slid around 1.75% in the turbulent trade environment.

Apple stock (+0.26%) was resilient with fellow tech giant Microsoft (+0.27%), helping lift the DJIA from its lows. Defensive domestic play Walmart was a bright spot, rising just over 1%.

Boeing ticked nearly 0.2% higher, ignoring both China-related fears and the fact that fresh obstacles in Europe might provide additional delays to the 737 MAX’s return to the skies.

Click here for a live Dow Jones Industrial Average chart.

Last modified (UTC): October 8, 2019 19:10

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Canadian ministers meet with CN Rail

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Canada’s Liberal government sent two ministers on Monday to meet with representatives of Canadian National Railway and its largest union, as already hard-hit shippers pleaded for government intervention to avert a strike planned for early on Tuesday.

The threatened strike by 3,000 workers with Teamsters Canada comes after CN, the country’s largest railroad operator, said on Friday it would cut management and union jobs, as it grapples with softer economic conditions.

Labour Minister Patty Hajdu and Transportation Minister Marc Garneau were to meet with representatives from CN and the union in Montreal, Hajdu’s press secretary Veronique Simard said, following a stalemate in contract talks.

CN said it believes a strike can be averted “with the assistance of federal mediators,” after Teamsters declined to submit to binding interest arbitration.

“We expect talks to continue up to Nov. 19,” CN said.

Teamsters and CN reached a last-minute deal in 2017 that averted a planned strike. Canada, one of the world’s biggest exporters of farm products, relies on its two main railways to move canola and wheat over the vast distances from western farms to ports. Crude oil shippers in Alberta have also used trains in the past two years to reach U.S. refineries as an alternative to congested pipelines.

Urging Ottawa to intervene

Alberta wheat and barley commissions, representing farmers, urged Ottawa to intervene, as they are already facing difficult harvest conditions because of weather. “There are a lot of farmers who already have a significant amount of their income trapped under snow,” said Gary Stanford, Alberta Wheat Commission chair. “Now adding insult to injury, we’re looking at possible CN rail strike action too.”

CN was expecting slightly lower fourth-quarter crude shipments from the third quarter, officials said on an Oct. 22 conference call.

“The minute they start shutting down trains you start backing up the grain elevators and you start backing up stuff on the farm,” Ward Toma, General Manager for Alberta Canola, said. “You start backing all that stuff up that not only affects farmers — but canola crushers send oil via rail, and canola meal via rail to the United States — you lose that ability, you start backing things up.”

Toma says according to Alberta’s last agriculture report, 20 per cent of the canola crop is still out in the fields. And he says this is the time of the year farmers look to sell and pay their bills by the end of the year.

“They’re busy, they still haven’t got the crop off and they are trying to move product.”

Slumping commodity prices, congested oil pipelines and a dispute with China that has hampered Canadian agriculture exports have pressured the economies of resource-rich western provinces.

Teamsters Canada spokesman Christopher Monette said the planned strike by its conductors, train personnel and yard workers comes because workers are “hitting a wall on issues related to health and safety.”

“While we continue to negotiate in good faith and in hopes of avoiding a labour dispute, we have every intention of striking at 12:01 a.m. ET tonight unless an agreement can be reached before then,” Monette said by email.

CN shares were trading down 0.5 per cent in early afternoon Toronto trading.

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Western Forest Products workers ended strike talk without resolution

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Western Forest Products Inc. says negotiations with the United Steelworkers union representing workers in a long-running coastal B.C. strike ended without resolution on the weekend.

The company says no active negotiations are occurring and no future mediation dates have been scheduled after 14 hours of bargaining occurred on Saturday and Sunday supervised by two independent mediators.

CEO Don Demens says the mediators informed the company talks were over after it presented a contract offer.

The strike which began July 1 affects about 3,000 coastal forest workers employed in Western Forest Products’ sawmills and timberlands operations.

Demens says the company offered a five-year agreement with a $2,000 signing bonus and wage increases of two per cent per year for the first four years and 2.5 per cent in the fifth year.

He says the company also agreed to drop proposals to modernize agreements, as well as pension plan alternatives opposed by the union, but didn’t go along with Steelworker demands for a shorter-term agreement, bigger wage hikes and less shift flexibility.

United Steelworkers Local 1-1937 president Brian Butler says the union would release its position on the matter later Monday.

The company’s shares lost five cents or 3.9 per cent at $1.22 in afternoon trading on the Toronto Stock Exchange.

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Over 100 bus cancellations in Metro Vancouver

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Photo: Downtown Vancouver, British Columbia, Canada – December 31, 2018: Bus driving on Granville Street. / Shutterstock

As the transit strike continues in Metro Vancouver, many bus passengers were left waiting a bit longer than usual during their Monday morning commute.

TransLink, the area’s transit operator, lists hundreds of service alerts on dozens of routes across the Lower Mainland as Unifor bus drivers, SeaBus operators and mechanics enter Day 18 of a labour dispute with Coast Mountain Bus Company.

Currently, the transit operator has listed a whopping 427 advisory alerts under its ‘bus’ section. Of course, some of these are scheduled detours, and a few are due to traffic, but the vast majority are cancelled as a result of the transit strike.

For example, the #3 bus, which saw a few cancellations this morning, has a number of advisories listed for this afternoon and evening:

  • 3 Main-Marine Drive Station trip leaving Eastbound W Cordova St @ Seymour St at 4:55 pm
  • 3 Main-Marine Drive Station trip leaving Eastbound W Cordova St @ Seymour St at 4:55 pm
  • 3 Main-Marine Drive Station trip leaving Eastbound W Cordova St @ Seymour St at 3:03 pm
  • 3 Downtown trip leaving Marine Drive Station @ Bay 1 at 2:13 pm
  • 3 Main-Marine Drive Station trip leaving Eastbound W Cordova St @ Seymour St at 5:24 pm
  • 3 Downtown trip leaving Marine Drive Station @ Bay 1 at 4:31 pm
  • 3 Main-Marine Drive Station trip leaving Eastbound W Cordova St @ Seymour St at 3:30 pm
  • 3 Main-Marine Drive Station trip leaving Eastbound W Cordova St @ Seymour St at 3:30 pm
  • 3 Main-Marine Drive Station trip leaving Eastbound W Cordova St @ Seymour St at 1:35 pm
  • 3 Downtown trip leaving Marine Drive Station @ Bay 1 at 12:45 pm

As of 11 a.m. on Nov. 18, approximately 114 bus routes in Metro Vancouver have advisory alerts. Some hard-hit routes include the busy line along Broadway and buses to Simon Fraser University, the University of B.C., the B.C. Institute of Technology and Capilano University.

“We’re expecting 5 to 10 per cent of service to be impacted today due to union job action,” Ben Murphy, TransLink spokesperson, told Vancouver Is Awesome in an email.

“This morning 4 SeaBus sailings also had to be cancelled.  Customers should sign-up for transit alerts and check the TransLink website or Twitter account for the most up-to-date information and impacts being caused by union job action.”

Murphy underscores that the view from Coast Mountain Bus Company is still that the union needs to be more realistic about their wage demands, and that its offer is in excess of other public sector settlements in British Columbia.

“Coast Mountain Bus Company has offered wage increases of more than $6,000 for transit operators and around $10,000 for skilled tradespeople.  This would bring transit operator salaries to just under $70,000, and skilled tradespeople salaries to around $88,000.”

Unifor lead negotiator Gavin McGarrigle and other Unifor representatives held a news conference in New Westminster earlier last week.

McGarrigle mentioned how, “TransLink CEO Kevin Desmond could see his pay soar by 25% to nearly $500,000 a year, while the head of the Toronto Transit Commission earns $150,000 less each year.”

“CMBC President Michael McDaniel has been on the job for about a year and a half and could see his salary soar by 18% to about $372,000,” he said.

McGarrigle added that, “both of these transit executives make more than the Prime Minister.”

“Translink simply doesn’t treat its workers fairly. They divide their workers into separate companies and tell skilled trades not to compare their wages with each other. In the employer’s mind, a comparison to Toronto’s transit system is fine for executive wages, but it’s somehow offside for transit operators,” said Gavin McGarrigle.

With files from the Canadian Press. 

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