ClearWater Market Commentary as of April 14th, 2022

Here is the ClearWater Market Commentary as of April 14th, 2022:

In this issue:
– Performance of Major Indices
– Market Commentary
– Last Week’s Key Economic  Events and Upcoming Events

Performance of Principle Indexes: 

S&P/TSX Composite Index  
5 Day-0.09%
1 Month0.39%
YTD2.98%
1 Year13.29%

As of 2022/04/14 – Source: www.marketwatch.com

Index PerformancesLast 5 DaysYTD
WTI Crude (oil)8.30%41.40%
CAC 400.63%-7.88%
Russell 20000.59%-10.64%
Nikkei 2250.40%-5.90%
S&P/TSX Composite-0.09%2.98%
FTSE 100-0.69%3.14%
Dow Jones Industrial-0.78%-5.19%
DAX-0.84%-10.83%
Shanghai Composite-1.25%-11.77%
Hang Seng Index-1.62%-8.03%
S&P 500-2.13%-7.84%
Nasdaq-2.63%-14.66%

As of 2022/04/14 – Source: www.marketwatch.com


Last week’s and next week’s key economic events:

US economy (S&P 500 -2.13%):

  • The major indexes ended up mixed over a holiday-shortened week, which saw the release of the first major corporate earnings reports of 2022. Value stocks continued to outperform their growth counterparts, but small-caps regained ground lost the previous week on large-caps.
  • Anticipation of a sharp deceleration in earnings growth appeared to be one factor weighing on sentiment.
  • Inflation data and how price pressures would impact corporate margins also seemed to be in the spotlight.
  • On Tuesday, the Labor Department reported that headline inflation jumped 1.2% in March, bringing the year-over-year increase to 8.5%, slightly above consensus expectations and a new four-decade high.
  • Stocks initially rose on hopes that inflation might be peaking, but the rally was short-lived as crude oil prices rallied back through USD 100 a barrel after Russian President Vladimir Putin said peace talks with Ukraine are stalled.
  • The recent steepening of the U.S. Treasury yield curve continued over the week, with short- and intermediate-term rates retreating and long-end yields ticking slightly higher.

Canadian markets (S&P/TSX -0.09%):

  • The S&P/TSX composite index closed up 17.68 points at 21,855.70.
  • Energy lead the index as we saw prices climb due to a supply shortfall despite release from strategic petroleum reserves in the U.S. and elsewhere as OPEC isn’t adding more output.
  • The Canadian dollar traded for 79.36 cents US compared with 79.32 cents US on Wednesday.
  • The May crude contract was up US$2.70 at US$106.95 per barrel and the May natural gas contract was up 30 cents US$7.30 per mmBTU.
  • The Bank of Canada expectedly raised its target overnight rate by 50 bps to 1.0%, marking its biggest hike in over twenty years.
  • The Bank also announced plans to reduce its balance sheet by allowing bonds to mature and run off its balance sheet.
  • Markets barely flinched at the news, as plenty of rate hikes have already been priced in.
  • The Bank still sees the economy in a strong position, revising its 2022 GDP forecast to 4.2% (from 4.0%) while bumping its 2022inflation to 4.5% (from 3.0%).
  • Given the Canadian economy’s towering debt overhang and its overall sensitivity to interest rates, it seems the Bank will struggle to reach the ambitious ~7 hikes that markets have priced in for the rest of 2022.

Performance 2021: S&P 500/400/600 Sectors

European and Asian economies:

  • European shares rose amid some relief that the European Central Bank (ECB) did not adopt a more hawkish stance at its policy meeting.
  • The ECB indicated at its latest policy meeting that it would adhere to its earlier guidance for a steady withdrawal of stimulus, saying that recent economic data “reinforce its expectation” that its asset purchases should end in the third quarter.
  • The UK’s economic recovery showed signs of faltering while inflation continued to accelerate. The jobless rate fell to 3.8% in February from 3.9% in January. Meanwhile, inflation jumped to a 30-year high of 7.0% in March from 6.2% in February.
  • National Rally Party leader Marine Le Pen and President Emmanuel Macron beat other challengers in the first round of the French presidential election and will face each other in the second round on April 24. Le Pen’s result and subsequent tightening opinion polls suggest she is the closest ever to winning power for the far-right in France.
  • Japan’s stock markets gained over the four-day period after the Bank of Japan (BoJ) Governor Haruhiko Kuroda asserted that Japan’s economy will continue to recover despite surging commodity prices, but he stressed that the central bank needs to maintain its massive monetary stimulus.
  • Japan’s producer price index, which measures the price of goods traded between companies, rose by 9.5% year on year in March, following a 9.7% rise in February.
  • Consumer price inflation, on the other hand, remains subdued, underpinning the BoJ’s commitment to accommodative monetary policy in the pursuit of its 2% inflation target.
  • In the BoJ’s Regional Economic Report for April, eight out of nine regions from across Japan revised downward their economic assessments from January, mainly reflecting a resurgence in the coronavirus and supply-side constraints in some sectors.
  • Chinese markets retreated in the week to Thursday as a surging coronavirus outbreak in Shanghai fueled concerns about supply chain disruptions.
  • Shanghai reported more than 27,000 coronavirus cases on Thursday, a new record, as the city experiences its worst outbreak since the virus first emerged in Wuhan in 2019.
  • Supply chain paralysis gripped parts of China’s manufacturing sector as a growing number of Chinese cities reimposed restrictions to quash the virus. Tesla, Volkswagen, Bosch, and domestic automakers Nio and SAIC Motor are among the companies that have suspended production.
  • In economic readings, China’s consumer price index accelerated in March, while the producer price index declined from February’s reading but still exceeded forecasts.
  • China’s cash-strapped property sector continued to generate negative headlines. Zhenro Properties became the latest developer to default, after the company revealed that it failed to pay interest payments totaling USD 20.4 million on two offshore bonds.
  • Property developer Fantasia Holdings, which defaulted in October, appointed a consultant to review its financial position and devise plans for possible asset sales, as well as help implement an overall debt restructuring plan.

What to watch this week:

  • Canada and US housing data
  • Canadian, UK and Chinese retail sales data
  • Chinese GDP and fixed asset investment data
  • Chinese, Eurozone and Japan industrial production data
  • Eurozone and Japan trade data
  • Eurozone and UK consumer confidence data
  • Global inflation data, including Canada
  • G20 Finance Minsters and Central Bank Governors Meeting

Sources: Bloomberg.com,Yardeni.com, Barron’s.com, Factset.com and Newyorkfed.org

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