ClearWater Market Commentary as of April 28th, 2023

Here is the ClearWater Market Commentary as of April 28^th, 2023:

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	-0.18%
1 Month	2.67%
YTD	6.51%
1 Year	-0.60%

^{As of 2023/04/28 – Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
Nasdaq	1.30%	16.80%
Shanghai Composite	1.14%	5.50%
Dow Jones Industrial	0.96%	2.95%
S&P 500	0.86%	8.82%
DAX	0.60%	17.77%
FTSE 100	0.50%	9.85%
MSCI EAFE	-0.10%	10.30%
S&P/TSX Composite	-0.18%	6.51%
Nikkei	-0.50%	6.60%
CAC 40	-0.79%	19.18%
Hang Seng Index	-0.83%	0.08%
Russell 2000	-1.18%	0.36%
WTI Crude (Oil)	-1.60%	-4.50%

^{As of 2023/04/28- Source: www.marketwatch.com}

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

US economy (S&P 500 0.86%):

• Stocks recorded mixed returns as attention focused on the season’s busiest week of quarterly earnings reports.
• 35% of S&P 500 Index companies, which together represent 44% of its market capitalization, were scheduled to release results during the week. Gains in just four stocks—Microsoft, Apple, Amazon.com, and Facebook parent Meta Platforms—accounted for nearly half of the S&P 500’s strong gain (the biggest since January 6), after Meta jumped 14% on an earnings beat.
• Cyclical sectors generally performed poorly, however, as investors weighed several new signs of an economic slowdown, particularly in the manufacturing sector. 
• Early in the week, several measures of regional manufacturing activity came in well below expectations and indicated that factories were cutting back on production in April.  
• Wednesday’s durable goods data were a surprise on the surface, showing a 3.2% rise in March orders. Orders excluding aircraft and defense—typically considered a better indicator of business spending plans—fell 0.4%, however. Signaling the need for further cutbacks in production and spending, retail inventories rose 0.4% for the month, more than expected and the most since last August. 
• On Thursday, the Commerce Department’s advance estimate of annualized growth in gross domestic product (GDP) in the first quarter came in at 1.1%, well below consensus expectations of around 2%.
• Renewed turmoil in the banking industry also heightened fears of a slowdown and possible recession. On Tuesday, U.S. markets ended on session lows following California’s First Republic Bank’s earnings release, which revealed that the bank had suffered more than USD 100 billion in deposit outflows in the first quarter.
• The news sent the stock down by roughly half and weighed on the overall regional banking space. On Friday morning, First Republic’s stock fell further after CNBC reported that the Federal Deposit Insurance Corporation was planning on taking the bank into receivership that evening.

Canadian markets (S&P/TSX -0.18%):

• Canada equities were higher at the close on Friday, as gains in the Energy, Industrials and Clean Technology sectors propelled shares higher.
• New GDP data Friday helped justify the Bank of Canada’s continued interest-rate pause. The data showed that economic growth in Canada is cooling, with Statistics Canada saying the economy grew by 0.1 per cent in February, compared with 0.6 per cent growth in January.
• The Bank of Canada is still hoping for a “Goldilocks” scenario, where inflation cools without sending the economy into a recession.
• In commodities trading, Gold Futures for June delivery was down 0.06% or 1.20 to $1,997.80 a troy ounce. Meanwhile, Crude oil for delivery in June rose 2.69% or 2.01 to hit $76.77 a barrel, while the July Brent oil contract rose 2.74% or 2.14 to trade at $80.36 a barrel.
• CAD/USD was unchanged 0.34% to 0.74, while CAD/EUR unchanged 0.47% to 0.67.

Performance 2023: S&P 500 Sectors   

Forward P/E Ratios: S&P 400/500/600 Sectors

European and Asian economies:

• Shares in Europe fell as fears that interest rate increases might tip the economy into recession intensified.  
• The eurozone economy treaded water in the first quarter, expanding less than expected, according to preliminary data. Gross domestic product ticked up 0.1%, a step up from the final quarter of last year, when GDP was flat. Economists polled by FactSet had predicted growth of 0.15%. The German economy stagnated—an improvement on the 0.5% contraction registered in the final quarter of last year but weaker than the 0.2% growth rate forecast by economists.
• Annual inflation in Germany, adjusted for comparison with other European Union (EU) countries, slowed to 7.6% in April from 7.8% in March, as energy price increases eased. In France, consumer prices increased by 6.9%, an acceleration from the 6.7% uptick recorded in March. Spain’s headline inflation rate came in at 3.8%, up from 3.1% in the preceding month.
• Economic sentiment in the eurozone held steady in April amid more optimism in the consumer and retail and services sectors, according to the European Commission. However, manufacturers were still pessimistic about production and order books. The sentiment index reached 99.3 in April versus a downwardly revised 99.2 in March.
• The UK budget deficit grew to GBP 139 billion in the year to March, up more than GBP 18 billion from a year earlier and the highest level on record, official data showed. However, the deficit is smaller than the GBP 152 billion forecast made by the Office for Budget Responsibility last month. Meanwhile, Lloyds Bank said that business confidence rose to its highest level in almost a year in April amid more optimism about the economy. The lender’s Business Barometer gauge of confidence rose to 33% from 32% in March, above its long-run average of 28%.
• The Riksbank, Sweden’s central bank, raised its key interest rate by a half percentage point to 3.5%, as expected, and signaled that a quarter-point increase could be forthcoming in June or September.
• Japan’s stock markets gained over the week. Markets were supported by a dovish BoJ, which signaled a continued commitment to its ultra-loose stance by leaving monetary policy, including its yield curve control framework, unchanged. The government’s easing of Japan’s border controls ahead of an anticipated increase in arrivals, particularly from China, due to the Golden Week holidays (observed at the end of April and the beginning of May) also boosted sentiment.
• The BoJ’s April 27–28 meeting, the first under new Governor Kazuo Ueda, signaled policy continuity. 
• However, given challenges around achieving its price stability target over the past 25-year period, the BoJ announced that it would conduct a broad review of monetary policy, with a planned time frame of around one and a half years. Ueda emphasized that policy change can take place while the review is being conducted. In its statement, the BoJ removed the forward guidance on interest rates and the mention of the need to closely monitor the impact of COVID, while reiterating a continued commitment to easing.
• In its separate Outlook report, the BoJ upgraded its forecasts for Japan’s core inflation slightly, to 1.8% in this 2023 fiscal year (FY), from the 1.6% it anticipated in January, and to 2.0% in FY2024, from 1.8%. The FY2025 forecast is at 1.6%. In the post-meeting press conference, Ueda said that while a positive price trend is emerging, it has not reached a level where the BoJ could confidently declare that it had met its 2% inflation target.
• Data released during the week showed that Tokyo-area inflation, a leading indicator of nationwide trends, accelerated in April: The core consumer price index rose 3.5% year on year, ahead of expectations and well above the BoJ’s inflation target.
• Chinese stocks ended mixed ahead of a five-day holiday as Beijing reaffirmed its supportive policy stance, assuaging concerns about an uneven economic recovery. The Shanghai Stock Exchange Index rose 0.67%, while the blue chip CSI 300 pulled back 0.09% in local currency terms. China’s stock markets are closed Monday through Wednesday for the Labor Day holiday and will resume trading on Thursday, May 4.
• China’s Politburo, the country’s top decision-making body, vowed to continue its “forceful” fiscal and monetary policy stance to support the economy as it faces obstacles in economic transformation and insufficient domestic demand, state media reported following a meeting of top officials. 
• While China’s economy expanded at its fastest pace in a year in this year’s first quarter, policymakers remain cautious on headwinds ranging from high youth unemployment and slowing global growth. Earlier in the week, China’s cabinet, the State Council, announced measures to encourage growth in the trade sector amid weakening global demand. The reforms include consolidating the shipment of vehicles and issuing visas for overseas businesspeople.
• The People’s Bank of China extended its short-term cash injections into the banking system via seven-day reverse repurchase agreements for the 11th straight day on Friday, marking the longest streak this year. The net total injection reached RMB 637 billion for the current cycle as the central bank attempted to ensure ample liquidity at month-end.
• Profits at industrial firms in China fell 21.4% from January to March from a year earlier, slightly better than the 22.9% drop recorded in the first two months of 2023, according to the National Bureau of Statistics. Despite an increase in exports and factory production, manufactured goods demand remained weak as companies struggled to recover from last year’s pandemic-induced slump. Producer deflation also persisted as factories were unable to boost prices, which further weighed on profits.

What to watch this week:

• Canadian trade and employment data
• US ISM PMIs and jobs report
• FOMC, ECB and RBA monetary policy announcements.
• Eurozone inflation, retail sales and employment data
• Global PMIs
• 162 S&P 500 and 75 S&P/TSX companies report earnings

• 

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

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