ClearWater Market Commentary as of December 3rd, 2021

Here is the ClearWater Market Commentary as of December 3rd, 2021:

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	-2.44%
1 Month	-3.83%
YTD	18.36%
1 Year	17.76%

^{As of 2021/12/03 – Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
FTSE 100	1.29%	11.47%
CAC 40	0.98%	23.26%
Shanghai Composite	0.75%	3.35%
DAX	0.15%	11.55%
Nikkei 225	-1.26%	1.76%
Dow Jones Industrial	-1.58%	12.98%
Hang Seng Index	-2.11%	-14.25%
S&P/TSX Composite	-2.44%	18.36%
S&P 500	-2.51%	20.83%
WTI Crude (oil)	-2.60%	36.80%
Russell 2000	-3.69%	9.34%
Nasdaq	-4.42%	17.05%

^{As of 2021/12/03 – Source: www.marketwatch.com}

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

US economy (S&P 500 -2.51%):

• In a volatile week of trading, the major equity indexes pulled back on news that the Federal Reserve could start reducing their monthly asset purchases at a faster rate, plus continued fears around the omicron strain and how it can reduce economic growth and worse supply chain disruptions.
• Fed Chair Jerome Powell acknowledged that inflationary pressures, while still expected to abate over the next year, had become broad enough and remained elevated for long enough that the central bank may consider accelerating the pace at which it tapers its monthly bond purchases.
• The market appeared to interpret this development as potentially moving forward the timeline for the Fed to begin increasing short-term interest rates.
• Powell also cited the uptick in the number of COVID-19 cases and the emergence of the omicron variant as possible catalysts for further supply chain disruptions as well as potential headwinds to the economic recovery and the labour market’s gradual rebalancing.
• Concerns about the omicron variant and Fed policy likewise moved fixed income markets. The Treasury yield curve flattened over the week.
• Weaker-than-expected job creation in November, which were well below the numbers seen in October.

Canadian markets (S&P/TSX -2.44%):

• Investors have been jittery this week in response to the more hawkish comments from the U.S. central bank around speeding up the tapering of bond purchases at the same time as a new COVID-19 variant has surfaced and economic activity is slowing. Canadian markets have been somewhat insulated by strong bank earnings, however.
• The Canadian Banks reported mixed earnings results for their fiscal fourth quarter. Scotiabank, TD Bank, and Bank of Montreal beat estimates, while the other three missed.
• Dividend increases and share buybacks were highly anticipated after last year’s moratorium barring such activity was lifted in early November by the Office of the Superintendent of Financial Institutions.
• As expected, the banks wasted no time taking advantage. It was a clean sweep for all six banks on both fronts, with BMO leading the pack in hiking their dividend a whopping 25% and the others raising theirs by 10% – 13%.
• Although share prices were volatile on the week amid Omicron angst and a sharp flattening of the yield curve, earnings results drove the share price action – a welcome reminder amidst all of the noise that fundamentals matter, earnings growth drives share prices and shareholder return of capital.
• Canadian real GDP rebounded sharply (5.4% versus 3.0% expected). Looking further ahead, the prospects for November should be dampened by the BC floods.
• Canadian employment surged (153,700 versus 37,500 expected), after last month’s 31,200 advance. The gains were primarily in the private sector and in services. The unemployment rate dropped to 6.0% (previously 6.7%).

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

European and Asian economies:

• Shares in Europe posted mixed results after a volatile week of trading, highlighted by concerns about the omicron variant and further evidence of inflationary pressures.
• Europe also saw increased mandates for coronavirus vaccines as cases of the omicron variant were detected across Europe.
• Eurozone inflation at record high; consumer sentiment weakens.
• Inflation in the eurozone accelerated to its highest level since the single currency was introduced in 1999. Consumer prices rose an annualized 4.9% rate in November, up from 4.1% in October, as energy costs surged. However, a senior official with the European Central Bank official, asserted in a television interview that “November will prove to be the peak” for inflation.
• European consumer sentiment weakened for a second consecutive month in November, according to a survey by the European Commission. Households are less upbeat about the general economic situation and their intentions to make major purchases.
• Japan’s stock markets registered losses for the week, with concerns about the spread of the omicron variant of the coronavirus and the country’s decision to close its borders to foreign nationals weighing on sentiment.
• In a major reversal of policy, Japan closed its borders to foreign nationals—except for those with special permission to enter—citing the emergence of the omicron variant of the coronavirus.
• Japan’s PM Kishida’s cautious stance is in contrast to that of his predecessor, Yoshihide Suga, who resigned in September, in part, due to public perceptions that his administration had been too slow to respond to the social and economic threats posed by the coronavirus.
• On a positive note, Japan saw positive Economic data which improved sentiment.
• Economic data releases lend some support to sentiment. Japan saw industrial production rise and the unemployment edge lower. Additionally, retail sales continue to improve.
• Chinese stocks recorded a weekly gain despite a resurgence of U.S.-China tensions after Chinese ride-hailing app Didi said it would delist its U.S.-listed shares from the New York Stock Exchange. News of Didi’s delisting came shortly after the U.S. Securities and Exchange Commission said that Chinese companies that list on U.S. stock exchanges must disclose whether they are owned or controlled by a government entity and provide evidence of their auditing inspections.
• In economic news, China’s factory activity unexpectedly rose in November for the first time in three months as surging raw materials prices and power rationing eased. The manufacturing Purchasing Managers’ Index (PMI) also in November from 49.2 in October.
• Turmoil in China’s property sector continued to weigh on investor sentiment as Kaisa Group said that it failed to receive bondholders’ approval to extend the maturity of a $400 million note due next week, making it the latest Chinese property developer to edge closer to default.
• China’s government could issue some kind of policy response to help the ailing property sector as the effects of recent defaults start to spread. Moreover, some developers have started to sell off assets, repay debt, and undertake other “self-help” measures to raise liquidity.

What to watch this week:

• Canadian Q3 National Balance Sheet Report
• Canadian monetary policy announcement
• US and Chinese inflation data
• Chinese money supply and aggregate yuan financing data
• UK industrial production and Purchasing Manager Index data
• Global GDP and trade data

• 

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

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