Market Insights

Weekly Market Commentary
May 18, 2012

Improving economic indicators overshadowed by Greek situation

Stock markets around the world retreated this week as investors tried to come to terms with the eurozone’s evolving crisis. However, the Canadian equity market fared better than many of its global counterparts, especially European and emerging markets.

In North America, positive economic data over the week wasn’t enough to overcome concerns caused by the eurozone situation, despite brief intra-day advances spurred by bargain hunting.

Canadian factory shipments exceeded expectations in March with the largest advance in six months. Factory orders in the U.S. rose in April. There were signs of progress in the U.S. housing market, with homebuilder confidence rising to a five-year high and housing starts gaining 2.6% in March.

As signs increasingly pointed to the possibility that Greece could exit the European Union, stock markets digested what this might mean to the future of the eurozone and the health of the global economy.

Talks aimed at forming a new Greek coalition government failed after recent elections left the country in turmoil. Europe’s banking sector was also a source of concern after the European Central Bank said it had halted liquidity operations with some Greek banks and a major debt rating agency downgraded 16 Spanish banks.

Canadian resource stocks were poor performers over the week. Gold bullion continued to fall, sinking to its lowest point since last July and keeping pressure on Canadian gold stocks. Financials stocks were pressured by European developments.

In other news this week:

  • The Canadian dollar fell to its lowest level against the U.S. dollar in four months.
  • A surprise buildup in U.S. crude inventories helped send North American oil prices to their lowest level in almost seven months.
  • Canadian inflation rose slightly in April, to 2% y-o-y from 1.9% in March.
  • Sales of existing homes rose 1.5% y-o-y, according to the Canadian Real Estate Association. The average price rose 0.9%.

What’s ahead next week:

Canada

  • Markets close Monday for Victoria Day.
  • Retail sales.

U.S.

  • New and existing home sales.
  • Durable goods orders.
  • University of Michigan Consumer Sentiment Index.

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This week's market closing values

  Level Change 1-week YTD 1-year 5-year
EQUITY INDICES     CAD CAD CAD CAD
S&P/TSX 11,280.64 - 414.03 - 3.54% - 5.64% - 17.10% - 4.37%
S&P 500 1,295.22 - 58.17 - 2.05% + 3.39% + 1.45% - 4.44%
DJIA 12,369.38 - 451.22 - 1.26% + 1.63% + 3.42% - 3.09%
FTSE 100 5,267.62 - 307.90 - 5.02% - 3.32% - 8.78% - 9.89%
CAC 40 3,008.00 - 121.77 - 3.24% - 6.13% - 29.11% - 15.33%
DAX 6,271.22 - 308.71 - 4.05% + 4.84% - 19.50% - 6.16%
Nikkei 8,611.31 - 342.00 - 0.64% - 0.53% - 3.62% - 6.63%
Hang Seng 18,951.85 - 1,012.78 - 2.86% + 3.21% - 13.41% - 3.08%
 
CURRENCY RETURNS CAD Change        
US$ 1.0209 + 0.0204 + 2.04% - 0.04% + 5.24% - 1.28%
Euro 1.3037 + 0.0112 + 0.86% - 1.51% - 5.69% - 2.38%
Yen 0.0129 + 0.0004 + 3.20% - 3.01% + 8.40% + 7.47%
 
CANADIAN TREASURIES Yield Change   COMMODITIES USD Change
3-month 0.99 - 0.02 Oil $91.06 - $5.07
5-year 1.42 - 0.08 Gold $1,591.13 + $11.73
10-year 1.89 - 0.08 Natural Gas $2.56 + $0.20

This Market Commentary is published by Investors Group. It represents the views of our Portfolio Managers, and is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by Investors Group or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, Investors Group, cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein.

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