ClearWater Market Commentary as of June 24th, 2022

Here is the ClearWater Market Commentary as of June 24th, 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	-0.63%
1 Month	-8.12%
YTD	-10.18%
1 Year	-5.77%

^{As of 2022/06/24 – Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
Nasdaq	7.49%	-25.81%
S&P 500	6.45%	-17.93%
Russell 2000	6.01%	-21.36%
Dow Jones Industrial	5.41%	-13.31%
Hang Seng Index	5.04%	-4.99%
Nikkei 225	4.27%	-6.67%
CAC 40	2.38%	-15.26%
Shanghai Composite	1.92%	-7.16%
FTSE 100	1.79%	-1.83%
WTI Crude (oil)	-0.40%	43.10%
DAX	-0.45%	-16.87%
S&P/TSX Composite	-0.63%	-10.18%

^{As of 2022/06/24- Source: www.marketwatch.com}

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

US economy (S&P 500 6.45%):

• Signs that inflation might be moderating as growth cooled helped stocks rally sharply over the holiday-shortened week, lifting the S&P 500 Index out of the bear market territory.
• Nearly every sector in the index recorded strong gains. Energy stocks were the notable exception, as oil continued to back off from its recent highs over most of the week.
• The week’s economic data offered several signals that the Federal Reserve’s forceful turn toward monetary tightening was having the intended effect of slowing the economy and moderating inflation. On Tuesday, the National Association of Realtors reported that existing home sales fell to their lowest level in May since June 2020, and its chief economist predicted further declines ahead in the face of higher mortgage rates.
• Investors appeared to react favourably to the S&P Global data, in part because it showed that manufacturing input inflation, although still elevated, fell to its lowest level in five months, while output charge inflation (the prices companies charge) had reached its lowest level since March 2021.
• The week’s biggest gains came Friday, following signs that consumers were stabilizing their inflation expectations as confidence in their finances reached new lows.
• Indeed, Fed Chair Jerome Powell testified before Congress on Wednesday and Thursday that inflation expectations appeared to remain anchored, which seemed to play a role in boosting sentiment in both equity and fixed income markets.
• Despite hawkish comments from some other current and former Fed officials, futures markets began pricing a slightly higher chance of only a 50-basis-point (bp, or 0.50 percentage point) increase in the federal fund’s target rate at the next policy meeting—although another 75 bp increase still seemed the most likely.

Canadian markets (S&P/TSX -0.63%):

• The S&P/TSX composite index closed up 345.79 points to 19,062.91.
• Commodities and tech-led rallies propelled Canada’s main stock index to its best performance in six weeks as it ended a wild week that was positive for the first time since early June.
• Canada’s heavyweight financials sector rose by less than one percent on recession concerns and what that could mean for loan losses.
• While market volatility should continue as the Fed and Bank of Canada are both expected to hike rates by another 75 basis points.
• The inflation data was the latest in a series of recent signs that have investors spooked about the chance of rising interest rates triggering a recession.
• Canadian inflation came in well above expectations, with headline CPI accelerating to 7.7%y/y in May from 6.8% y/y, the fastest pace in nearly four decades. The gains were led by soaring gas prices (+12%), but the increases were seen across the board.
• Retail sales for April jumped to 0.9%, up from 0.2%, driven by general merchandise stores, gas stations, and miscellaneous retailers. Excluding autos, retail sales were even stronger.
• The Canadian dollar traded for 77.32 cents US compared with 77.03 cents US on Thursday.

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

European and Asian economies:

• Shares in Europe snapped three weeks of losses as signs that the economy is slowing cast doubt on whether central banks would seek to increase interest rates aggressively.
• Germany moved to the second “alarm stage” of its emergency plans to reduce gas consumption and increase storage inventories of the thermal fuel after Russia sharply reduced pipeline flows. Sweden and Denmark joined Germany, Austria, and the Netherlands in implementing measures aimed at countering a supply squeeze and averting winter shortages. In addition, Germany, Austria, and Romania moved to reopen some coal plants for electricity generation.
• Consumer confidence in the eurozone unexpectedly tumbled to -23.6 points in June, according to an early estimate published by the European Commission. This sentiment reading was near the nadir hit in April 2020, early in the coronavirus pandemic, and likely reflected the effects of soaring inflation.
• UK inflation accelerated to a record 9.1% in May as food costs rose at the fastest rate in 13 years. Meanwhile, the S&P Global/CIPS UK Flash Composite PMI remained at a 15-month low of 53.1 in June, as businesses struggled with falling orders.
• Japan’s stock markets registered gains for the week. Sentiment was supported by continued expectations that the Bank of Japan (BoJ) would keep its monetary policy ultra-loose, despite upward trending consumer prices and the yen at fresh lows.
• Japan’s core consumer price index rose 2.1% year on year in May, topping the BoJ’s 2.0% inflation target for the second consecutive month, as positive contributions increased in non-fresh food and household durables. The contribution from energy declined during the month.
• The minutes of the BoJ’s April monetary policy meeting released during the week showed that, while inflation expectations had risen—particularly in the short term and at a more moderate pace over the medium- to long-term—many members expressed the view that underlying inflation, excluding such factors as energy, remained relatively low.
• As campaigning for Japan’s July 10 upper house election kicked off, Prime Minister Fumio Kishida reiterated the view that, under the current circumstances, the status quo on the monetary policy must be maintained. He also said that the government will prioritize the implementation of measures aimed at cushioning the impact of high energy and food prices.
• Chinese stock markets advanced on stimulus hopes after President Xi Jinping pledged to roll out more measures to support the economy and minimize the impact of COVID-19.
• At a virtual BRICS (Brazil, Russia, India, China, and South Africa) Business Forum, President Xi stated that China will “strengthen macro-policy adjustment and adopt more effective measures to strive to meet the social and economic development targets for 2022 and minimize the impacts of COVID-19.”
• Many analysts have lowered their growth forecasts for China after the country’s zero-tolerance approach to the coronavirus led to widespread lockdowns that disrupted economic activity and global supply chains this year.
• In economic readings, an official index that tracks apartment and house sales posted year-on-year declines for 11 months, the longest losing streak since China created a private property market in the 1990s, according to Bloomberg. The persistent property slump has raised fears that it poses a greater risk to China’s economy than the recent coronavirus lockdowns.

What to watch this week:

• Canada GDP data
• US durable goods orders and personal spending and income data
• Eurozone inflation and consumer confidence data
• UK GDP data
• Japan employment, industrial production, retail sales and consumer confidence data
• OPEC+ meeting
• Global Purchasing Manager Indices, including ISM manufacturing

 

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

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