ClearWater Market Commentary as of July 8th, 2022

Here is the ClearWater Market Commentary as of July 8th, 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	-1.07%
1 Month	-4.65%
YTD	-11.30%
1 Year	-6.96%

^{As of 2022/07/08 – Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
Nasdaq	4.60%	-25.60%
Nikkei 225	2.52%	-6.87%
S&P 500	1.90%	-18.20%
Dow Jones Industrial	0.80%	-13.80%
CAC 40	0.62%	-16.24%
DAX	0.51%	-19.18%
Russell 2000	0.33%	-22.80%
FTSE 100	-0.52%	-2.56%
S&P/TSX Composite	-1.07%	-11.32%
Shanghai Composite	-2.70%	-8.96%
Hang Seng Index	-3.23%	-9.72%
WTI Crude (oil)	-3.40%	39.20%

^{As of 2022/07/08 – Source: www.marketwatch.com}

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

US economy (S&P 500 1.90%):

• Stocks erased much of the previous week’s losses on optimism that the Federal Reserve will be able to curb inflation without tipping the economy into a recession. The gains pulled the S&P 500 Index out of the bear market territory, leaving it down 19.1% from its January peak at the close of trading Friday. 
• Energy shares fell sharply on Tuesday as domestic oil prices fell back below USD 100 per barrel for the first time in nearly two months, but they rallied alongside crude prices later in the week.
• The most closely watched market data came in the form of Friday’s payrolls report from the Labor Department, which showed employers added 372,000 nonfarm jobs in June, well above consensus expectations of around 270,000. 
• The moderating economic data may have prompted some investors to brush off the hawkish stance that the Federal Reserve reiterated in its June meeting minutes, which were released on Wednesday. The minutes also revealed that policymakers acknowledged that “risks included the possibility that a further tightening in financial conditions would have a larger negative effect on economic activity than anticipated.”
• Fed officials continued to publicly state their resolve to raise rates as much as necessary to keep inflation expectations anchored, however, with Fed Governor Christopher Waller telling an economists’ conference on Thursday that “we’ve got to chop this off now.” 
• The stronger-than-expected jobs report lifted the yield on the benchmark 10-year U.S. Treasury note to roughly 3.10% at the close of trading on Friday amid a broad rise in U.S. rates. The closely watched 2-year/10-year segment of the Treasury yield curve inverted as the 2-year yield climbed above the 10-year yield—a common, if imperfect, a signal of a coming recession. 

Canadian markets (S&P/TSX -1.07%):

• Canada’s main stock index ended up for the week despite slipping Friday after a June jobs report reinforced expectations that the central bank will pursue another aggressive interest rate hike next week.
• In Canada, the economy lost 43,000 jobs last month but the unemployment rate fell to a record low of 4.9 percent. In the U.S., employment continued to be strong and beat expectations with 372,000 jobs created and the unemployment rate remaining at 3.6 percent.
• The S&P/TSX composite index closed down 40.31 points to 19,022.86.
• The energy lost 1.1 percent even as crude oil prices rose, with Crescent Point Energy Corp. and Athabasca Oil Corp. down 3.0 and 2.7 percent, respectively.
• The August crude contract was up US$2.06 at US$104.79 per barrel and the August natural gas contract was down 26.3 cents at US$6.03 per mmBTU.
• The Canadian dollar traded for 77.11 cents US compared with 77.01 cents US.
• Telecommunications was softer as shares of Rogers Communications Inc. led the sector lower, dropping 1.2 percent as it suffered a widespread network outage that left many customers without mobile and internet service.

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

European and Asian economies:

• Shares in Europe advanced in the first week of July after three consecutive months of losses. However, the gains appeared to be restrained by China’s reimposition of some restrictions designed to curb the spread of the coronavirus and worries that an energy shortage might cause a recession in Europe. 
• A sharp uptick in the U.S. dollar weighed broadly across all currencies, but the USD/EUR currency pair notably approached parity this week.
• The minutes of the European Central Bank’s (ECB) June meeting showed most members agreeing to a 25-basis-point increase to the deposit rate in July and leaning toward a 50-basis-point move in September. 
• Germany’s trade balance showed a deficit of EUR 1 billion in May—the first since 1991—as exports fell unexpectedly, in part due to supply constraints. Imports, meanwhile, surged on higher prices for food, energy, and materials.
• Boris Johnson announced his intention to resign after more than 50 ministers and several Cabinet members stepped down in protest at his handling of a series of scandals that have rocked his administration. Despite calls for Johnson to step down, he said that he will remain as caretaker prime minister until the Conservatives choose a new party leader.
• Campaigning for the parliamentary upper house election on July 10 was suspended after Shinzo Abe, Japan’s former and longest-standing prime minister, was shot and killed while giving a campaign speech in the western city of Nara. 
• After stepping down in 2020, Abe remained influential as a member of parliament and head of the LDP. The basic tenets of Abe’s signature economic policy, “Abenomics,” built on the three pillars of monetary easing, fiscal stimulus, and structural reforms, have largely been retained by current Prime Minister Fumio Kishida’s government.
• Japan’s stock markets gained during the week, with the Nikkei 225 Index up 2.24% and the broader TOPIX Index gaining 2.30%. 
• Chinese stocks eased as rising coronavirus cases and elevated geopolitical tensions hurt sentiment. 
• China’s coronavirus caseload for Thursday totaled 478, up from Wednesday’s 409 count. Most cases were detected in the eastern province of Anhui, where more than 1 million people in small towns are locked down. Dozens of new cases also appeared in Jiangsu and other provinces. Shanghai, which recently ended a two-month-long lockdown, faces a “relatively high” risk of further community transmission of COVID-19, a senior health official said on Friday.
• On the geopolitical front, Sino-U.S. tensions heated up after a senior Chinese military officer warned his U.S. counterpart that any “arbitrary provocations” would be met with a “firm counterstrike” by China.
• In economic readings, the Caixin Services Purchasing Managers’ Index (PMI) for June surged to a better-than-expected 54.5 from 41.4 in May, the latest evidence that China’s economy is recovering from easing virus restrictions. This follows the previous week’s Caixin manufacturing PMI, which revealed that manufacturing activity expanded at its fastest pace in 13 months in June.

What to watch this week:

• Bank of Canada monetary policy announcement and report
• Canada housing data
• US inflation, retail sales, and industrial production data
• US Fed Beige Book
• China GDP, trade, industrial production, retail sales, fixed-asset investment, money supply, aggregate yuan financing data
• Eurozone industrial production and trade data
• UK GDP, industrial production, and trade data
• G20 Finance Ministers and Central Bank Governors meeting
• US Big Banks kick off Q2 earnings season
  

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

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