This week in the markets


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Hopes for rate cut overpowers trade concerns

June 14 2019   

Equity markets began the week a step higher, following the previous Friday’s news that U.S. President Donald Trump would suspend the tariffs he had threatened to impose on Mexico to compel progress on border negotiations. On Monday, Trump also sounded optimistic about the chances of a trade deal with China. In addition to lifting stock prices, the brighter tone pushed up Treasury yields and triggered a pullback in gold from three-month highs. But by Tuesday, investors’ concern about rising protectionism returned, after the U.S. President again issued threats to raise tariffs on China if Chinese President Xi Jinping didn’t agree to meet at the upcoming Group of 20 summit in Osaka, Japan. For its part, China appeared to harden its resistance rather than show signs of potential capitulation in the trade dispute. For the rest of the week, stocks, bond yields, and gold prices all retraced much of their earlier moves.

Toronto’s S&P/TSX Composite Index managed a modest advance for the week, with gains in seven of its 11 sectors. The materials, consumer discretionary, and technology sectors all saw decent gains. But the all-important energy sector dropped as oil prices extended their eight-week slide to more than 20% (and to their lowest level in five months) after an industry report showed rising U.S. crude inventories. An attack on two tankers in the Persian Gulf late in the week sparked a rally in crude that mitigated some of the losses. Communication services stocks fell after Canadian heavyweights Rogers and Bell introduced new wireless data plans that ratchet up pricing pressures in the industry.

The S&P 500 held on for a weekly gain, as continued optimism that the U.S. Federal Reserve (the Fed) might soon cut interest rates appears to have softened concerns about trade tensions. Key to the hopes for imminent Fed action were fresh measures showing the continued slowing of both core inflation and inflation expectations. Other economic data reflected improved small business sentiment and a still-solid labour market. Notably, the number of job openings in April exceeded the number of unemployed Americans by the largest margin on record. The consumer discretionary sector saw the best gains, while energy, technology and industrials declined.

Most European and Asian markets also managed gains for the week, despite generally softer economic news. In Italy, industrial production unexpectedly dropped, while the country continues negotiations with the European Union over its planned budget deficit. Real gross domestic product (GDP) in Britain registered the largest drop in over three years, probably due to a reversal of previous stockpiling ahead of earlier Brexit deadlines. A delay of the Brexit date to October 31 gave businesses more time to plan. Industrial production dropped in the U.K. in April by the most in nearly 17 years. Despite all that, U.K. unemployment remains at the lowest level since 1974. Asian markets finished in the green, overcoming significantly weaker industrial production and trade data in China, and the temporary closure of much of Hong Kong’s financial district due to protests.

What’s ahead next week:

Canada

  • Consumer Price Index (May)
  • Retail sales (April)

U.S.

  • Federal Reserve interest rate decision
  • Empire State Manufacturing Survey (June)
  • Housing starts, Building permits (May)
  • Conference Board Leading Index (May)
  • Markit Purchasing Managers Indices (June)
  • Existing home sales (May)

This weeks market closing values

EQUITY INDICES Level Change 1-week YTD 1-year 5-year
      CAD CAD CAD CAD
S&P/TSX 16,301.91 + 70.95 + 0.44% + 13.82% - 0.17% + 1.68%
S&P 500 2,886.98 + 13.64 + 1.46% + 13.27% + 6.32% + 12.96%
DJIA 26,089.61 + 105.67 + 1.39% + 10.00% + 6.19% + 13.91%
FTSE 100 7,345.78 + 13.84 - 0.03% + 6.12% - 8.20% - 0.15%
CAC 40 5,367.62 + 3.57 - 0.13% + 9.22% - 4.15% + 3.83%
DAX 12,096.40 + 51.02 + 0.23% + 10.28% - 8.89% + 4.51%
Nikkei 21,116.89 + 232.18 + 1.70% + 5.45% - 3.18% + 10.15%
Hang Seng 27,118.35 + 153.07 + 0.98% + 3.27% - 8.45% + 7.27%
CURRENCY RETURNS CAD Change 1-week YTD 1-year 5-year
US$ 1.3411 + 0.0144 + 1.09% - 1.66% + 2.33% + 4.32%
Euro 1.5029 - 0.0006 - 0.04% - 3.88% - 0.86% + 0.45%
Yen 0.0124 + 0.0001 + 0.75% - 0.67% + 4.30% + 3.04%
CANADIAN TREASURIES Yield Change COMMODITIES USD Change
3-month 1.66 + 0.00 Oil $52.50 - $1.49
5-year 1.33 - 0.01 Gold $1,341.40 + $0.59
10-year 1.44 - 0.02 Natural Gas $2.37 - $0.06