ClearWater Market Commentary as of February 25th, 2022

Here is the ClearWater Market Commentary as of February 25th, 2022:

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

Performance of Principle Indexes: 

^{As of 2022/02/25 – Source: www.marketwatch.com}

^{As of 2022/02/25 – Source: www.marketwatch.com}

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

US economy (S&P 500 0.82%):

• The major indexes closed mostly higher after a holiday-shortened week of historic volatility sparked by Russia’s invasion of Ukraine.
• On Thursday, the Nasdaq Composite Index swung by 6.8%, the largest intraday range since the World Health Organization declared the start of the coronavirus pandemic in March 2020. As one example of the volatility, Tesla added USD 100 billion to its market capitalization over the course of the day on Thursday but declined roughly 5.5% over the week as a whole.
• The consumer discretionary sector generally underperformed within the S&P 500 Index as the turmoil in Europe weighed on travel-related shares. Conversely, resilience in internet giants Alphabet (the parent company of Google) and Meta Platforms (the parent company of Facebook) supported communication services stocks. Health care shares were also strong.
• Although a Russian incursion into Ukraine had been widely anticipated, investors appeared surprised by Russian President Vladimir Putin’s decision to launch a broad-scale invasion beyond the breakaway Donbass region.
• Over the previous weekend, Putin recognized the independence of the so-called Luhansk and Donetsk People’s Republics in eastern Ukraine and announced their occupation by Russian “peacekeeping” troops.
• News of attacks on the capital, Kyiv, and other major cities on Wednesday evening and Thursday morning sent stocks sharply lower, the S&P 500 Index hit 4,115, nearly 15% below its peak at the start of the year, putting it firmly in correction territory. The conflict also sent shock waves through fixed-income markets.
• The week’s earnings reports and economic data generally seemed to take a back seat to the geopolitical tensions, however. The Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures price index, rose 5.2% over the year ended in January, up from the prior month’s pace and in line with estimates.

Canadian markets (S&P/TSX 0.47%):

• Canada’s main stock index had its second-best day of the year following strong bank results and hopes that the war in Ukraine will temper aggressive interest rate hikes next month.
• The S&P/TSX composite index closed up 344.07 points to 21,106.00. It follows a volatile session that saw a nearly 350-point swing on the day.
• Energy led the way, gaining 2.3 percent despite a drop in crude oil prices, a day after breaching US$100 per barrel.
• The heavyweight financials sector wasn’t far behind, getting a lift from banks after CIBC and National Bank beat expectations and posted strong first-quarter results.
• The Canadian dollar traded for 78.45 cents US compared with 77.93 cents US on Thursday.

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

European and Asian economies:

• Shares in Europe fell as Russia’s invasion of Ukraine fueled fears of higher inflation and an economic slowdown.
• The European Union (EU) and the UK began imposing sanctions on Russia as part of a coordinated Western response to the invasion of Ukraine. These measures included export controls on certain technologies and financial penalties on parliamentarians, the defense minister, wealthy individuals, and banks. The UK also said it would stop Russian companies from raising capital in Britain and banned Russian airline Aeroflot.
• Germany halted approval of Gazprom’s Nord Stream 2 pipeline, which would transport natural gas from Russia.
• Eurozone business activity accelerated in February as easing coronavirus restrictions boosted the services sector, an IHS Markit survey showed. Rising demand and fewer supply bottlenecks lifted manufacturing activity as well.
• UK business activity rebounded in February after disruptions caused by the omicron variant of the coronavirus at the turn of the year, according to initial PMI data.
• EU Executive Vice President Valdis Dombrovskis said the European Commission will soon ask governments to start withdrawing pandemic-related fiscal stimulus in 2023 because the economy has recovered and is growing strongly.
• Amid ongoing caution about the conflict between Russia and Ukraine, Japan’s stock market returns were negative for the week.
• In response to Russia’s initial infringement of Ukraine’s sovereignty —Japan adopted the first set of sanctions on Wednesday.
• Prime Minister Fumio Kishida said that Japan had enough oil and gas reserves to cushion any short-term blow to energy supplies and that the government would implement measures to limit the economic impact of further oil price increases.
• On the economic data front, flash PMIs showed that business activity in Japan’s private sector contracted sharply in February, driven by a steep downturn among service providers, while manufacturers signalled a moderate improvement in operating conditions.
• Markets in China recorded a weekly loss as the Ukraine conflict depressed risk sentiment.
• The People’s Bank of China’s (PBOC) decision to keep interest rates steady also dampened buying sentiment.
• In China’s debt-laden property sector, home prices rose 2.3% in January from a year earlier, the slowest year-over-year growth pace since December 2015, though a slight improvement from December marked the first monthly increase in home prices since September.
• Nevertheless, the country’s property sector remains in dire straits. All of China’s largest listed developers that disclose monthly sales data reported double-digit sales drops in January, according to Nikkei Asia, underscoring the challenges facing the sector.

What to watch this week:

• Canada Provincial Budgets
• US personal spending and income and durable goods orders data
• Eurozone inflation data
• Eurozone and UK consumer confidence data
• New Zealand monetary policy meeting
• Global Purchasing Manager Indices
• 55 S&P 500 and 57 S&P/TSX companies report earnings

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

Thank you for checking out our ClearWater Market Commentary for February 25th, 2022 If you would like to receive the ClearWater Commentary at the start of every week, sign-up for our Newsletter.