ClearWater Market Commentary as of January 7th, 2022

Here is the ClearWater Market Commentary as of January 7th, 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	-0.65%
1 Month	0.93%
YTD	-0.65%
1 Year	16.86%

^{As of 2022/01/07 – Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
WTI Crude (oil)	5.20%	6.30%
Hang Seng Index	2.03%	1.49%
FTSE 100	1.10%	1.16%
CAC 40	-0.62%	0.27%
S&P/TSX Composite	-0.65%	-0.65%
Dow Jones Industrial	-0.97%	-0.29%
DAX	-1.04%	-0.20%
Nikkei 225	-1.09%	-1.09%
Shanghai Composite	-1.27%	-1.27%
S&P 500	-2.49%	-1.87%
Russell 2000	-4.08%	-2.92%
Nasdaq	-5.66%	-4.53%

^{As of 2022/01/07 – Source: www.marketwatch.com}

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

US economy (S&P 500 -2.49%):

• Stocks backed away from record highs at the start of the week as expectations for higher interest rates took a particular toll on growth stocks and the technology-heavy Nasdaq Composite—which suffered its biggest weekly decline in nearly a year.
• Technology and health care shares were particularly weak within the S&P 500 Index, while energy shares outperformed as domestic oil prices pushed back toward USD 80 per barrel.
• The S&P 500 reached a new high on Monday, although if you stripped out gains in Tesla and mega-caps Apple and Amazon.com would have left the S&P 500 nearly flat for the day.
• Market Sentiment took a notable turn for the worse on Wednesday afternoon following the release of minutes from the Federal Reserve’s meeting stating that they are discussing faster and more aggressive rate hikes, with the first 0.25% increase coming as soon as March.
• The week’s omicron news seemed to have a mixed impact on markets. The new lockdowns in Hong Kong appeared to contribute to Wednesday’s sharp declines, and U.S. case numbers set new records. Investors seemed reassured that hospitalizations, though rising, were apparently decoupling from reported cases and the number of deaths remained roughly stable.
• Economic data released during the week were also mixed. Both manufacturing and service sector activities missed consensus expectations but still indicated healthy expansion.
• Friday’s jobs data offered decidedly mixed signals. New jobs created were roughly half of expectations, but on the other hand, the unemployment rate fell to 3.9%, lower than the 4.2% expected. The conflicting data suggested that many Americans were choosing self-employment.

Canadian markets (S&P/TSX -0.65%):

• Canadian equities were higher at the close on Friday, as gains in the Healthcare, Energy and Financials sectors propelled shares higher.
• The energy and financials sectors lifted Canada’s main stock index to start 2022 in anticipation that the Omicron variant will carry less of a punch despite rising infections.
• Canadian employment (Dec.) rose (54,700 versus 25,000 expected), following the prior month’s 153,700 gain. A 122,500 gain in full-time positions drove the advance and revealed the economy’s strength before the renewed lockdown measures.
• The better-than-expected gain brought the unemployment rate down a tick to 5.9%, just shy of the 5.7% pre-pandemic level. The participation rate held steady at 65.3%. Wages continue to grow modestly, up 2.7% y/y, down from 3% prior and below 3.2% expected.
• Canada’s merchandise trade surplus (Nov.) widened to $3.1 billion (versus $2.0 billion expected, up from $2.1 billion). Exports jumped 3.8% m/m, despite the BC Floods, while imports rose 2.4% m/m.

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

European and Asian economies:

• Shares in Europe pulled back amid worries that central banks may reduce asset purchases and raise interest rates at a faster pace to contain persistent inflation.
• Europe posted record levels of coronavirus infections. In France, daily cases soared above 330,000, prompting hospitals to brace for a crisis. The government reduced the self-isolation period for infected people to mitigate staffing shortages. Italy ruled that all university staff and people above age 50 must be vaccinated. Spain moved to make mask-wearing mandatory again, and the army was deployed to help regions increase vaccination. However, most countries stopped short of imposing lockdowns.
• Inflation in the eurozone accelerated to a record level in December, driven by a surge in energy and food costs. German inflation came in near a 30-year high, prompting Finance Minister Christian Lindner to announce that the government was considering financial aid for lower-income households to pay for rising heating bills.
• The resurgent coronavirus hit the eurozone service sector and dampened business activity in December, a survey showed.
• Inflation remained elevated at the end of 2021, with input and output cost increases coming in just below November’s record levels.
• Japan’s stock markets generated mixed returns for the week. Concerns about more aggressive monetary policy tightening by the U.S. Federal Reserve weighed on technology and other growth stocks.
• Citing surging COVID-19 cases, Prime Minister Fumio Kishida brought back quasi-states of emergency to three prefectures, lasting until January 31.
• Japan’s manufacturing and services sectors were buoyed by signs of a gradual recovery from the coronavirus pandemic in December.
• Chinese stocks fell for the week amid ongoing turmoil in the property sector and the U.S. Federal Reserve’s hawkish tilt.
• In economic readings, the Manufacturing Purchasing Managers’ Index, rose to a higher-than-expected result in December.
• China’s cash-strapped property developers, which are grappling with an unprecedented liquidity squeeze due to a housing slump and high debt levels, continued to make headlines. China Evergrande, the world’s most indebted developer with over USD 300 billion in borrowings, said it would seek approval for a payment delay on one of its yuan-denominated bonds at a meeting with creditors over the weekend.
• Evergrande has not yet missed any payments on its onshore bonds, which are more senior than the offshore debt, after missing USD 82.5 million in offshore interest payments last month.
• Meanwhile, Shimao Property failed to pay off part of a local loan after its creditor demanded early repayment, causing a sell-off in its bonds and shares. Kaisa Group, which became the first Chinese developer to default on its dollar bonds in 2015, is under pressure from local authorities to repay investors in its wealth management products.
• In pandemic news, China continued to lock down the city of Xi’an and reimposed travel restrictions in Shenzhen after two infections were detected in the southern tech hub.
• Hong Kong also announced additional restrictions, including a two-week ban on incoming flights from eight countries, including the U.S. and UK.

What to watch this week:

• No material data releases in Canada
• US inflation and retail sales data
• US Federal Reserve’s Beige Book
• US, UK, and Eurozone industrial production data
• Chinese inflation, money supply and aggregate yuan financing data
• Chinese and UK trade data
• Japanese trade data
• Eurozone employment data
• UK GDP data

• 

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

Thank you for checking out our ClearWater Market Commentary for January 7th, 20212 If you would like to receive the ClearWater Commentary at the start of every week, sign-up for our Newsletter.