ClearWater Market Commentary as of June 10th, 2022

Here is the ClearWater Market Commentary as of June 10th, 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	2.48%
1 Month	0.87%
YTD	-4.47
1 Year	0.68%

^{As of 2022/06/10 – Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
WTI Crude (oil)	1.40%	60.20%
Shanghai Composite	0.67%	-12.17%
S&P/TSX Composite	-2.61%	-4.47%
Hang Seng Index	-2.71%	-9.96%
Nikkei 225	-3.33%	-6.27%
Dow Jones Industrial	-4.62%	-13.61%
Russell 2000	-4.74%	-19.82%
FTSE 100	-4.93%	-2.05%
SP 500	-5.35%	-18.16%
Nasdaq	-5.98%	-27.52%
CAC 40	-7.46%	-15.28%
S&P 500	-7.90%	-15.04%

^{As of 2022/06/10- Source: www.marketwatch.com}

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

US economy (S&P 500 -5.35%):

• Stocks finished with steep losses despite some early-week strength. The equities market turned south on Thursday afternoon, and the selling accelerated on Friday following the release of hotter-than-expected consumer price index (CPI) data for May. 
• Oil prices climbed for most of the week before falling on Friday, finishing the week modestly higher and supporting energy sector stocks to some degree. Losses in the tech-heavy Nasdaq Composite were worse than in the broad market as higher interest rates reduced the appeal of companies that may not generate meaningful earnings until well into the future. Value stocks held up better than growth stocks.
• The May CPI release was the focus of the week’s economic data. The report showed that headline inflation was 8.6% from a year earlier, topping consensus estimates. 
• May’s headline CPI was also higher than April’s 8.3% reading, disappointing investors who had been looking for price increases to slow. Core CPI, which excludes food and energy, climbed 6% from a year ago, also faster than consensus estimates.
• In a sign that the labor market may be loosening, weekly initial jobless claims increased and hit their highest level since January. However, the acceleration in headline inflation is keeping pressure on the Federal Reserve (Fed) to raise rates aggressively and leading to anticipation of more hikes of 50 basis points each—rather than 25—into the second half of the year.
• U.S. Treasury yields increased, with yields on short- and intermediate-term maturities climbing sharply after the CPI release.

Canadian markets (S&P/TSX -2.48%):

• Higher-than-expected U.S. inflation prompted a selloff across North American stock markets as investors fear the Federal Reserve will hike interest rates even more aggressively and push the economy into recession.
• That pushed the S&P/TSX composite down 289.07 points or 1.4 per cent to 20,274.82 It snapped a three-week winning streak to end the week off 2.5 per cent.
• Canada’s merchandise trade surplus for April narrowed to $1.5 billion from a downwardly revised surplus of $2.3 billion (versus $2.8 billion expected). Exports (+0.6%) and imports (+1.9%) rose on a jump in consumer goods. However, on a volume basis, exports fell (-1.3%), while imports rose (+0.7%)
• Canadian employment (May) rose more than expected (39,800 versus 27,500expected, from 15,300). The gain was concentrated in full-time employment; part-time employment fell. The unemployment rate inched down to 5.1% from 5.2% (versus 5.2% expected), while the participation rate held steady at 65.3%.  
• The Canadian dollar traded for 78.27 cents US compared with 79.09 cents US on Thursday.
• Bank of Canada’s Financial System Review concluded that rising interest rates increase the vulnerability of the financial system primarily due to elevated household debt and high house prices

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

European and Asian economies:

• European shares fell sharply after the European Central Bank (ECB) suggested that it may increase interest rates at a faster-than-expected pace after July, when it plans to end its ultra-loose monetary policy. 
• The ECB signaled that it plans to start raising its key deposit rate, which stands at -0.5% currently, by a quarter point in July to contain record inflation. However, the central bank added: “If the medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate at the September meeting.” 
• The ECB lowered its outlook for economic growth and raised its projection for inflation, which it now sees staying above the 2% target over the three-year forecast period. 
• Inflation is expected to accelerate to 6.8% in 2022—compared with 2.6% last year—before declining to 3.5% in 2023 and 2.1% in 2024. The ECB called for the economy to expand 2.8% this year, down from its previous forecast of 3.7%. The central bank’s projections show economic growth slowing to 2.1% in 2023 and 2024.
• British Prime Minister Boris Johnson saw off a challenge to his leadership, winning 59% of votes in a ballot held by the members of parliament of his Conservative party. Johnson has come under fire for holding parties in the prime minister’s office during coronavirus lockdowns in the UK.
• Stocks in Japan registered moderate gains for the week. Sentiment was supported by Cabinet Office data showing that Japan’s economy shrunk by an annualized 0.5% over the first quarter of the year, less than the initial estimate of a 1.0% contraction. 
• Japan’s reopening to tourism provided a further boost. 
• Late Friday, senior officials from the Bank of Japan (BoJ) and Japan’s Ministry of Finance, issued a joint statement voicing concerns about rapid yen weakening. He also said that, with Japan’s economic growth still below pre-pandemic levels, the BoJ must extend its support for economic activity by continuing with current monetary easing.  
• Prime Minister Fumio Kishida’s Cabinet approved plans for the government’s fiscal and economic policy program, which had initially been presented as a “new form of capitalism” with a strong focus on income redistribution. 
• Stocks in China rallied amid hopes for looser monetary policy and signs that Beijing was easing its years long crackdown on the technology sector. 
• China’s regulators are ending their probe into DiDi Global and will restore the ride-hailing giant’s mobile apps back on domestic app stores, The Wall Street Journal reported. Separately, media outlets reported that authorities are in talks about reviving the initial public offering for Ant Group, which was pulled in December 2020 after the fintech company’s founder Jack Ma made critical comments about China’s financial regulators. 
• In economic readings, exports grew at a double-digit pace and imports expanded for the first time in three months in May, as factories reopened and supply chain issues improved. 
• New bank lending in China rose more than expected in May, and broader credit growth also quickened, reflecting policymakers’ efforts to reverse the country’s coronavirus-driven slump. 
• In coronavirus news, last weekend, Shanghai planned to lock down millions of residents for mass coronavirus testing over the weekend, days after the last lockdown was lifted on June 1. Meanwhile, Beijing shut down entertainment and internet venues in two of the capital’s largest districts. The latest restrictions came after a handful of community cases were found in both cities, reflecting the Chinese government’s determination to eradicate the virus through a zero-tolerance approach even as other countries try to live with the virus.

What to watch this week:

• Canada trade and employment data
• US inflation data
• Australia and Europe monetary policy announcements
• China inflation, aggregate yuan financing, money supply, and trade data
• Japan GDP and trade data
• Eurozone GDP data

Global purchasing manager indices 

• 

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

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