This week in the markets


Share this 

                

North American stocks rally again to record highs in wake of trade deal signing

January 17, 2020

Major stock market indices in both Canada and the U.S. moved further into record territory as the U.S. and China signed their Phase-one trade agreement. At the same time, officials from both the U.S. and China announced plans to meet more regularly to discuss trade issues, and the U.S. reversed its designation of China as a currency manipulator. Additional support to equities came from improving economic data, the U.S. Senate’s ratification of the United States-Mexico-Canada Agreement (USMCA) trade deal, and from the kick-off of earnings reporting season, which saw positive results from some of the biggest U.S. banks.  The S&P 500 has now hit all-time highs, at least on an intra-day basis, for eight consecutive trading sessions.

All sectors of Canada’s S&P/TSX Composite Index made gains. The health care sector led the way with a surge in the shares of cannabis stocks after some of the companies reported better-than-expected sales and earnings. The energy sector lagged all others as crude prices slipped and extended the decline that began after Iran and the U.S. stepped back from escalating tensions last week. The materials sector similarly underperformed as the price of gold fell slightly. Among individual names, Bombardier Inc. stood out with a plunge of more than 35%. This followed a warning about disappointing fourth quarter revenues, as well as the announcement that it may pull out of a joint venture with Airbus SE that makes the A220 jetliner, potentially forcing a big write-down of that investment. The news about the A220, originally known as the Bombardier C-Series, came just one day after Air Canada unveiled its first A220 at a high-profile event in Montreal.

In the S&P 500, all sectors except for energy were higher. Advancing sectors were led by the interest rate-sensitive utilities group that rose as U.S. bond yields flirted with lower levels after muted inflation data. A solid start to earnings reporting season was accompanied by a raft of reassuring economic news. Especially encouraging were signs that the manufacturing sector, which had been struggling much of last year, is maybe growing again. Two widely watched indicators, the Empire State Manufacturing Survey and the Philadelphia Fed Survey, rose more than expected. In addition, retail sales remained strong and initial unemployment claims stayed near all-time lows. Supported by rising employment and low interest rates, homebuyer demand, as evidenced by weekly mortgage applications, soared to its highest level in 11 years, and housing starts surged to their highest in 13 years.

All major European equity markets advanced. The U.K. outperformed, while Germany and Italy lagged. Industrial production for the Euro area was reported higher in November, its first increase since August, but was slightly below expectations. Asian markets were mostly higher, especially Australia, in reaction to the truce in U.S.-China trade relations. China is Australia’s largest trading partner by far, receiving 35% of Australia’s exports. Tokyo stocks climbed after core machine orders were reported to have unexpectedly surged in November. And in another sign of better global growth, the Organisation for Economic Co-operation and Development’s (OECD) monthly leading indicator rose in November for the first time in over two years.

 

What’s ahead next two weeks:

Canada

  • Bank of Canada interest rate decision (Jan. 22)
  • Manufacturing sales (November)
  • New Housing Price Index (December)
  • Wholesale trade sales (November)
  • Consumer Price Index (December)
  • Retail sales (November)

U.S.

  • Existing home sales (December)
  • Conference Board Leading Index (December)
  • Markit Purchasing Managers Indices (January)

This weeks market closing values

EQUITY INDICES Level Change 1-week YTD 1-year 5-year
      CAD CAD CAD CAD
S&P/TSX 17,559.02 + 324.53 + 1.88% + 2.90% + 15.43% + 4.18%
S&P 500 3,329.62 + 64.27 + 2.12% + 3.77% + 24.12% + 12.46%
DJIA 29,348.10 + 524.33 + 1.98% + 3.54% + 18.33% + 12.82%
FTSE 100 7,674.56 + 86.71 + 1.00% + 0.60% + 10.86% + 1.90%
CAC 40 6,100.72 + 63.61 + 0.93% + 1.49% + 21.79% + 7.85%
DAX 13,526.13 + 42.82 + 0.19% + 1.05% + 18.57% + 6.86%
Nikkei 24,041.26 + 190.69 + 0.35% + 0.53% + 14.57% + 10.66%
Hang Seng 29,056.42 + 418.22 + 1.59% + 4.07% + 7.75% + 5.59%
CURRENCY RETURNS CAD Change 1-week YTD 1-year 5-year
US$ 1.3070 + 0.0020 + 0.15% + 0.62% - 1.57% + 1.75%
Euro 1.4498 - 0.0019 - 0.13% - 0.48% - 4.13% + 0.90%
Yen 0.0119 - 0.0001 - 0.48% - 0.77% - 2.35% + 3.09%
CANADIAN TREASURIES Yield Change COMMODITIES USD Change
3-month 1.65 + 0.01 Oil $58.69 - $0.35
5-year 1.58 - 0.02 Gold $1,556.87 - $5.47
10-year 1.57 - 0.02 Natural Gas $2.06 - $0.02