This week in the markets

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Global equities higher despite COVID-19 resurgence casting doubt on economic recovery

July 10, 2020

Stocks staged a late-week rally after Gilead Sciences’ drug Remdesivir was reported to significantly reduce COVID-19 mortality risk. Most world equity markets struggled earlier as investors grew concerned that rising coronavirus cases could set back the pace of economic recovery. There were big gains in the shares of large technology and Internet companies, which have proven resilient to economic lockdowns. These accounted for much of the gain in the S&P 500 Index, and boosted the Nasdaq Composite Index to a record high. Diminishing economic enthusiasm pushed gold prices to their highest level since 2011, and pressed oil prices and government bond yields lower. Many Asian markets advanced after investors were encouraged by a front-page editorial in the state-run China Securities Journal that touted the importance of a “healthy” bull market.

Reports from both the Bank of Canada (BoC) and the federal government gave Canadian investors a clearer picture of COVID-19’s impact on the country’s economy. The BoC’s quarterly Business Outlook Survey (BOS), which was conducted at the height of the COVID-19 lockdowns and released Monday, described weak conditions in all regions and sectors. On Wednesday, Finance Minister Bill Morneau published the government’s fiscal and economic “snapshot” that forecast a deficit of more than $340 billion this year. The projected deficit, at nearly 16% of gross domestic product (GDP), is the largest since World War II, and will push Canada’s federal debt beyond $1 trillion for the first time. The snapshot assumes that real GDP will decline by 6.3% this year but will bounce back 5.5% in 2021. Although one credit agency already downgraded Canada’s rating last month because of the rising deficit, Morneau suggested the debt level was manageable given the historically low level of interest rates. Although concern about rising debt sometimes gives rise to higher bond yields, Canadian yields continued to fall in tandem with global government bond yields. Morneau’s statement, bearing no significant surprises, had little impact on capital markets. A strong June employment report on Friday lifted the S&P/TSX Composite Index into the green to end the week. Materials led the advancing sectors due to the strength in gold. The energy sector led decliners because of the weakness in oil prices.

The S&P 500 finished the week higher after Inc., Apple Inc., Microsoft Corp. and Facebook Inc. all moved to record highs. These four mega-capitalization companies, along with Alphabet Inc. (Google), are key beneficiaries of the increase in online activity and working from home, and accounted for about three quarters of the S&P’s gains. The five tech titans comprise about 22% of the index. Energy led declining sectors. There was some encouraging economic data. The non-manufacturing ISM Purchasing Managers’ Index (PMI) was much stronger than expected, and applications for unemployment benefits declined, indicating a stabilizing job market. However, much of the job market improvement came from states (for example, Florida, Arizona and Texas) that eased restrictions early and that are now reversing some of those moves. This suggests that some of the job market gains will be reversed in coming weeks.

Many major stock markets in Europe were down. Here too, there was some encouraging economic data. Euro area retail sales, the UK construction PMI and industrial production in Germany, Italy and France were all stronger. Germany and Italy managed to close higher after Friday’s rally. But the European Commission increased the size of its forecast contraction for the area’s economy this year and Hungary’s Prime Minister said it looked unlikely that the European Union would agree on a stimulus plan at a summit next week. Asian markets were mixed, with Japan virtually unchanged and Australia lower. Hong Kong stocks saw a solid gain after the bullish cheerleading by state media, and the Shanghai Composite Index made its largest one-day advance since 2015.

What’s ahead next weeks:


  • Bank of Canada interest rate decision (July 15)
  • Manufacturing sales (May)
  • Wholesale trade sales (May)


  • Consumer Price Index (June)
  • Import, Export Price Indices (June)
  • Empire State Manufacturing Survey (July)
  • Industrial production, Capacity utilization (June)
  • Retail sales (June)
  • Housing starts, Building permits (June)
  • Univ. of Michigan Consumer Sentiment Index (July)

This weeks market closing values

EQUITY INDICES Level Change 1-week YTD 1-year 5-year
S&P/TSX 15,713.82 + 117.07 + 0.75% - 7.91% - 5.13% + 1.75%
S&P 500 3,185.04 + 55.03 + 1.87% + 3.37% + 10.63% + 10.41%
DJIA 26,075.30 + 247.94 + 1.07% - 4.20% + 0.93% + 9.45%
FTSE 100 6,095.41 - 61.89 + 0.60% - 19.33% - 15.08% - 4.43%
CAC 40 4,970.48 - 36.66 + 0.13% - 12.27% - 6.85% + 1.95%
DAX 12,633.71 + 105.53 + 1.71% + 0.15% + 6.54% + 3.94%
Nikkei 22,290.81 - 15.67 + 0.84% - 0.00% + 9.13% + 6.74%
Hang Seng 25,727.41 + 354.29 + 1.74% - 3.83% - 4.36% + 2.03%
CURRENCY RETURNS CAD Change 1-week YTD 1-year 5-year
US$ 1.3597 + 0.0050 + 0.37% + 4.67% + 3.94% + 1.44%
Euro 1.5367 + 0.0128 + 0.84% + 5.49% + 4.41% + 1.69%
Yen 0.0127 + 0.0001 + 0.91% + 6.34% + 5.43% + 4.28%
3-month 0.18 - 0.02 Oil $40.51 - $0.14
5-year 0.36 - 0.03 Gold $1,799.06 + $23.11
10-year 0.55 - 0.01 Natural Gas $1.78 + $0.17