Market insights
Market Commentary - February 5, 2010
Materials and IT producers lead TSX 1.2% higher on week
Canada’s S&P/TSX Composite index added 1.2% over the week ended February 5, 2010 as signs of improving employment conditions in both Canada and the U.S. drove the benchmark higher at the close of a turbulent week for global equity markets.
Figures released Friday by the U.S. Labour Department showed joblessness in the world’s largest economy shrank last month to its lowest level in five months. U.S. unemployment fell to 9.7% in January from 10% in December. A separate measure of employment conditions disappointed investors, however, as non-farm payrolls contracted by 20,000. Employment had been projected to rise by 11,000.
Meanwhile, Statistics Canada figures released Friday showed Canadian employers added 43,000 jobs last month. The fourth rise in employment in six months reduced the nation’s jobless rate by a tenth of a per cent to a nine-month low of 8.3%.
The upbeat jobs data buoyed investor sentiment on both sides of the border Friday, helping to ease growing global concern over ballooning deficits in southern Europe.
The TSX’s Information Technology and Materials sectors led a group of eight advancing sectors on the week, climbing 7.1% and 3.3%, respectively. The nation’s energy producers weighed upon the broad benchmark this week, as crude oil’s descent to a seven-week low drove the TSX’s Energy sector 0.1% lower.
In the United States, the S&P 500 index closed 0.7% lower over the week ended February 5, 2010 despite a series of generally upbeat economic releases. Figures released this week showed activity in the U.S. manufacturing sector rose last month to its highest level since August of 2004. The Institute for Supply Management (ISM) this week reported its manufacturing index rose to 58.4 in January from 54.9 a month earlier. The ISM’s nonmanufacturing index also edged higher last month, reflecting a return to growth in the U.S. services sector. The measure rose to 50.5 in January from 49.8 a month earlier.
The S&P 500’s Utilities sector led the retreat, slipping 2.1% on the week, while the Materials and Information Technology sectors closed up 0.8% and 0.7% respectively.
In Europe, Banks led the Dow Jones Stoxx 600 index 3.9% lower over the week ended February 5, 2010 as concern mounted over public sector debt levels in countries such as Greece, Spain and Portugal.
While the European Commission this week backed Greece’s plan to get its fiscal house in order over the next three years, huge deficits have sparked speculation Greece and some of the other so-called “peripheral” euro-zone countries could have trouble refinancing their debts. The cost of insuring debt against default rose this week to record highs in Greece, Spain and Portugal.
The Stoxx 600’s Banks sector fell 6.4% on the week to lead a broad-based retreat. Of the benchmark’s 19 sectors, 14 fell 3% or more.
News of a 15-year high in U.K. manufacturing activity did little to sway investor sentiment. Markit Economics this week reported its Manufacturing Purchasing Managers Index surged from 54.6 in December to 56.7 last month – its highest level since October of 1994.
Similarly, figures released this week showed a measure of manufacturing activity in China rose last month at its steepest rate on record. HSBC’s China Manufacturing Purchasing Managers Index climbed to an all-time high of 57.4 in January from December’s reading of 56.1. It was the tenth consecutive monthly expansion in China’s manufacturing activity.
Despite the upbeat news, China’s Shanghai Composite index extended its year-to-date slump, falling 1.7% over the week ended February 5, 2010. The benchmark has fallen 10.3% thus far this year amid growing concern the People’s Bank of China’s efforts to contain inflation will choke growth in the world’s third largest economy.
Markets across Asia also closed broadly lower this week. The Dow Jones STOXX Asia/Pacific 600 ex. Japan index, a measure of market activity throughout the Asia/Pacific region, fell 3.3% on the week, extending its year-to-date decline to 10.1%, while Japan’s Nikkei 225 index slipped 1.4%.
In the bond market, 10-year U.S. Treasuries edged higher this week as growing uncertainty in Europe drove the U.S. dollar to an eight-month high against the euro. Yields, which move inversely to prices, fell 5 basis points to close at a 3.56%.
Looking ahead to next week, investors await key data on U.S. retail sales and consumer sentiment.
Christine Décarie, Vice-President, Portfolio Manager, I.G. Investment Management, Ltd.
This Market Commentary is published by Investors Group. It represents the views of our Portfolio Managers and external investment advisors, 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.
Please read the mutual fund's prospectus before investing. Commissions, trailing commissions, management fees and other expenses may be associated with mutual fund investments. There is no guarantee that the fund will maintain its net asset value or that the full amount of your investment will be returned to you. Past performance may not be repeated.
© Copyright 2009 Investors Group Inc. Reproduction or distribution of this commentary in any manner without the express written consent of Investors Group is strictly prohibited. Please read Conditions of Use for more information concerning authorized uses of this document.
