ClearWater Market Commentary as of April 22nd, 2022

Here is the ClearWater Market Commentary as of April 22nd, 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	-3.16%
1 Month	-3.72%
YTD	-0.17%
1 Year	10.91%

^{As of 2022/04/22 – Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
CAC 40	-0.12%	-7.99%
DAX	-0.15%	-10.97%
Nikkei 225	-1.02%	-7.87%
FTSE 100	-1.24%	1.86%
Dow Jones Industrial	-1.75%	-6.95%
Russell 2000	-2.49%	-13.57%
S&P 500	-2.73%	-10.37%
S&P/TSX Composite	-3.16%	-0.17%
Shanghai Composite	-3.40%	-15.19%
Nasdaq	-3.70%	-17.93%
Hang Seng Index	-4.09%	-11.79%
WTI Crude (oil)	-5.00%	35.10%

^{As of 2022/04/22 – Source: www.marketwatch.com}

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

US economy (S&P 500 -2.73%):

• The major U.S. equity indexes ended the week lower. The Russell 1000 Growth Index stocks gave up more ground than its value counterpart, while the large-cap S&P 500 Index posted steeper losses than the S&P SmallCap 600 Index and the S&P MidCap 400 Index.
• Within the S&P 500, the communication services sector pulled back the most. Shares of Netflix tumbled more than 35% during the week, as the company reported disappointing quarterly results that were headlined by a sequential decline in its global subscriber rolls. Only the consumer staples sector gained ground.
• Preliminary data for the S&P Global U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, suggested that growth in business activity slowed in April but remained strong.
• James Bullard, president of the Federal Reserve Bank of St. Louis, reiterated his view that to try to curb elevated inflation, the central bank should move “expeditiously” to bring interest rates to neutral or to a level that neither stimulates nor impedes economic growth.
• Bullard indicated that a rate increase of as much as 75 basis points (0.75 percentage points) could be up for discussion, although he also said that a move of this magnitude would not be his base case and suggested that the economy should expand this year and in 2023.
• At an event hosted by the International Monetary Fund (IMF), Fed Chair Jerome Powell said a 50-basis-point rate increase could be “on the table” for the May 3‒4 policy meeting and stated that “it is appropriate…to be moving a little more quickly.”

Canadian markets (S&P/TSX -3.16%):

• Canada’s main stock index slipped from early gains to post its largest daily slump in three months on fears of slowing economic growth as members of the U.S. Federal Reserve signalled that an aggressive rate hike is coming next month to tame inflation.
• All 11 major sectors on the TSX were in the red, led by materials, energy and technology.
• The week started well but then went sour after Fed chairman Jerome Powell talked about the tightness in the labour market and the need for higher rates to cool down inflation.
• This led to an expectation that there’s going to be a tightening of financial conditions which puts pressure on growth and valuations and essentially the market.
• The energy lost 3.6 percent despite increased crude oil prices. The price increase stems from signs that Russian oil production is starting to feel the pinch from sanctions as anecdotal evidence points to its output dropping about 10 percent since its invasion of Ukraine.
• The Canadian dollar traded for 78.65 cents US compared with 79.81 cents US on Thursday.

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

European and Asian economies:

• Shares in Europe fell amid ongoing concerns about the war in Ukraine and increased hawkishness among central bank policymakers.
• Speaking at the annual IMF/World Bank meeting, European Central Bank (ECB) President Christine Lagarde reiterated that its asset purchase program will conclude in the third quarter and that incoming data will determine interest rate moves.
• ECB Vice President Luis de Guindos, previously seen as a dove, suggested that a rate increase could occur as early as July.
• Business activity in the eurozone unexpectedly accelerated in April, driven by quicker growth in the services sector as economies emerged from coronavirus lockdowns, according to a survey of purchasing managers. Manufacturing activity, however, appeared close to stalling due to ongoing supply constraints, rising prices, and disruptions related to Russia’s invasion of Ukraine.
• The latest economic data reinforced a picture of stuttering economic growth in the UK. Business activity grew at the slowest rate in three months in April, as record inflation pressures and the Ukraine conflict curtailed orders in the services sector. Market research firm GfK said consumer confidence slumped in April, approaching its lowest level since the data series began 50 years ago.
• French President Emmanuel Macron appeared to cement his lead over National Rally Party leader Marine Le Pen ahead of the decisive second round of the presidential election on April 24, according to opinion polls.
• Japan’s stock markets rose modestly over the week. Consumer price inflation continued to lag other major developed economies—the core consumer price index was up 0.8% year on year in March—and remained a key factor behind the Bank of Japan’s (BoJ’s) continued pursuit of its ultra-loose monetary policy.
• With the yen hovering around a two-decade low against the U.S. dollar, BoJ Governor Haruhiko Kuroda did however reiterate that, overall, a weak yen benefits the economy by boosting the value of companies’ overseas earnings. Kuroda also reaffirmed the central bank’s commitment to its massive stimulus program to support the still-fragile economic recovery.
• In its April Economic Report, the Cabinet Office upgraded its assessment, stating that the Japanese economy is showing signs of picking up as the severe coronavirus situation is easing.
• April flash PMI data showed an expansion in services sector activity and a rise in output levels in the manufacturing sector. Business confidence eased, as concerns about the war in Ukraine and the impact of strict coronavirus lockdowns in China on supply chains, costs, and demand weighed on sentiment.
• Chinese markets slid as investors worried about the economic fallout from coronavirus lockdowns after officials said tough restrictions would remain in place.
• Foreign investors sold a net USD 1.01 billion worth of Chinese stocks so far in April via the Hong Kong Stock Connect program. The latest outflow comes after foreigners sold roughly USD 7.1 billion in March, which was the largest outflow in nearly two years. The outflows have stoked official concern, with the China Securities Regulatory Commission reportedly calling upon the country’s National Social Security Fund, banks, and insurers to boost their equity investments, Bloomberg reported.
• The People’s Bank of China (PBOC) kept interest rates steady, leaving the one-year loan prime rate at 3.70% and the five-year rate at 4.60%.
• China’s economy grew at a stronger-than-expected 4.8% pace in the year’s first quarter from a year ago. The IMF cut China’s 2022 growth forecast to 4.4% from 4.8% in its latest outlook, the second downgrade for the country in three months.
• The IMF also warned that China’s economy could slow more than currently projected and have supply chain consequences for Asia and beyond.

What to watch this week:

• U.S. Case-Shiller Home Price Index (February)
• U.S. Durable Goods New Orders (March)
• U.S. New Home Sales (March)
• U.S. Pending Home Sales (March)
• U.S. Real GDP Growth – Preliminary Estimate (Q1 2022)
• Germany Consumer Price Index (April)
• U.S. PCE Price Index (March)
• Germany Real GDP – Final (Q4 2021)

• 

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

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