This week in the markets


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Good news from China lifts global equities


April 18 2019   

Stock markets made gains in all major regions in this holiday-shortened week after improving economic data from China lifted investor sentiment. North American equities lagged those in Europe and Asia, but the S&P/TSX Composite Index climbed to a new all-time high, eclipsing the record set in the third quarter of last year. As money drifted away from safe havens, gold prices retreated to their lowest point this year, after touching an 11-month high in February.

Canada’s benchmark S&P/TSX drifted sideways most of the week before advancing into record territory Thursday. The difficulty moving higher perhaps reflects lacklustre home sales activity reported for March, and a sharp weakening of the Bank of Canada’s (BoC) First Quarter Business Outlook Survey. The survey’s overall indicator slipped to its lowest in two years, reinforcing expectations that the BoC will hold off on hiking interest rates any time soon. But odds of a rate cut are also diminished, after inflation was reported bumping up against the BoC’s inflation target. Higher bond yields early in the week helped place the financials sector among the top performers, and resulted in declines for the interest rate-sensitive bond proxies – real estate and staples – moves that stuck even after yields reversed course. The financials sector also gained support from the early results as first quarter earnings reporting season gets underway. Consumer discretionary names were similarly strong. The health care sector was among the worst decliners, suffering from drops in some of the cannabis companies as revenues disappointed, and from pressure on Bausch Health Cos., which, like many U.S. health companies, is facing challenges from both Democrat and Republican proposals going into the 2020 U.S. election campaign. Lower gold prices weighed on the materials sector.

In contrast to the BoC Survey’s gloomy tone, the U.S. Federal Reserve’s Beige Book release sounded more positive than the last one. Data releases were, on balance, encouraging. Industrial production disappointed, but the Empire State Manufacturing survey climbed higher than expected, March retail sales were robust, and February’s trade gap surprisingly narrowed, suggesting support for first quarter GDP. Industrial stocks and technology led advancing sectors in the S&P 500. The semiconductor group was especially strong, after Apple Inc. settled a long-running global litigation battle with Qualcomm, sparking a surge in Qualcomm’s stock. Intel also jumped, after the company said the Apple-Qualcomm news allowed it to wind down its own 5G smartphone modem business, a move cheered by investors. As in Canada, policy proposals and higher bond yields weighed on the health care and real estate sectors, respectively.

Better economic prospects for China lifted all major Asian and European markets, even as European PMI data disappointed, Germany sliced its growth forecast for this year in half, and U.S. trade tensions continue to pivot from China toward the European Union. China’s GDP growth and retail sales were better than expected, industrial production jumped to the fasted growth in four and a half years, and news reports indicated the government was considering more stimulus. The Shanghai Stock Exchange Composite Index is now up over 30% so far in 2019 - the best year-to-date performance among major stock markets.

What’s ahead next week:

Canada

  • Bank of Canada interest rate decision
  • Wholesale trade sales (February)

U.S.

  • Housing starts, building permits (March)
  • New, existing home sales (March)
  • Durable goods orders (March)
  • Gross Domestic Product (First quarter)
  • Univ. of Michigan Consumer Sentiment Index (April)

This weeks market closing values

EQUITY INDICES Level Change 1-week YTD 1-year 5-year
      CAD CAD CAD CAD
S&P/TSX 16,612.81 + 132.28 + 0.80% + 15.99% + 6.97% + 2.76%
S&P 500 2,905.03 - 2.38 + 0.32% + 13.88% + 13.54% + 13.64%
DJIA 26,559.54 + 147.24 + 0.96% + 11.88% + 13.62% + 14.51%
FTSE 100 7,459.88 + 22.82 - 0.11% + 10.96% - 1.43% + 1.14%
CAC 40 5,580.38 + 77.68 + 1.20% + 13.67% - 0.47% + 4.48%
DAX 12,222.39 + 222.46 + 1.64% + 11.54% - 6.85% + 5.13%
Nikkei 22,090.12 + 219.56 + 1.45% + 6.83% + 1.00% + 11.06%
Hang Seng 29,963.26 + 53.50 + 0.54% + 13.72% + 4.79% + 9.62%
CURRENCY RETURNS CAD Change 1-week YTD 1-year 5-year
US$ 1.3386 + 0.0063 + 0.47% - 1.84% + 5.99% + 3.96%
Euro 1.5034 - 0.0020 - 0.14% - 3.85% - 3.80% - 0.26%
Yen 0.0120 + 0.0001 + 0.51% - 3.90% + 1.50% + 2.12%
CANADIAN TREASURIES Yield Change COMMODITIES USD Change
3-month 1.68 + 0.00 Oil $64.01 + $0.12
5-year 1.62 - 0.03 Gold $1,275.28 - $15.07
10-year 1.77 - 0.02 Natural Gas $2.66 - $0.09