ClearWater Market Commentary as of May 27th, 2022

Here is the ClearWater Market Commentary as of May 27th, 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 2022/05/27 – Source: www.marketwatch.com}

^{As of 2022/05/27- Source: www.marketwatch.com}

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

US economy (S&P 500 2.73%):

• The large-cap S&P 500 Index and the tech-heavy Nasdaq Composite Index gained ground, breaking a string of seven consecutive weekly declines. Every sector in the S&P 500 advanced, with consumer discretionary and energy stocks performing especially well. This cross-sector strength appeared to reflect an optimism that inflationary pressures could be peaking.
• Inflationary pressures contributed to some softening in early readings for U.S. purchasing managers’ indexes (PMIs).
• The minutes from the early-May meeting of the Federal Open Market Committee contained few surprises, with all members voicing support for 50-basis-point rate increases over the next few meetings in an effort to bring interest rates to a neutral level that neither inhibits nor stimulates economic growth.
• The core personal consumption expenditures price index, which excludes food and energy, ticked up 0.3% in April, in line with expectations and little changed from the preceding three months.
• On an annual basis, this inflation metric came in at 4.9%, a moderation from March’s 5.2% reading. Personal consumption expenditures grew at a faster pace than inflation, increasing 0.9% sequentially in April.
• The benchmark 10-year U.S. Treasury yield traded lower, as the market appeared to focus on signs of slowing growth in the economy that could lead to a slower pace of Federal Reserve rate hikes. (Bond prices and yields move in opposite directions.)

Canadian markets (S&P/TSX 4.64%):

• Canada’s main stock index posted a triple-digit advance on Friday in late-morning trading as gains in the energy and technology sectors helped lead the market higher. The S&P/TSX composite index closed up 216.40 points to 20,748.58.
• A report showing that U.S. inflation slowed a bit last month caused North American stock markets to rally strongly into the weekend.
• Eight of the 11 major sectors on the TSX ended higher, led by health care, technology, consumer discretionary, industrials and financials.
• The Canadian dollar traded for 78.51 cents US compared with 78.17 cents US on Thursday.
• The July crude oil contract was up 98 cents at US$115.07 per barrel and the July natural gas contract was down 16.8 cents at US$8.73 per mmBTU.
• Canadians’ confidence in home-price growth is continuing to erode. In the latest Nanos Canadian Confidence Index for Bloomberg, 51.6 percent of respondents said they expect real estate prices will rise. A month ago, 60.8 percent of respondents said they thought prices will rise.

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

European and Asian economies:

• Shares rose as confidence grew that inflation may be peaking and as central banks signalled that interest rate increases are likely to be gradual.
• Lagarde appeared to side with hawkish colleagues in a blog post, confirming an early end to the ECB’s bond-buying program in the third quarter and making her first explicit call for interest rate increases. The key deposit rate is currently -0.5%.
• A purchasing managers ‘ survey showed that Eurozone business activity in the private sector held up better than feared in May amid strong demand for services, particularly from households.
• A UK purchasing managers’ survey showed that business activity came close to stagnating in May.
• Japan’s stock market started the week positively, only to be dragged lower by three consecutive session losses. A late rally on Friday, however, not only helped to snap the losing streak but also saw Japanese equities end in positive territory.
• The Nikkei 225 Index jumped on Monday, taking positive cues from the U.S., to close above the psychological 27,000 level. However, this positivity was short-lived following the release of a survey showing activity in the country’s manufacturing sector grew at the slowest pace in three months in May amid supply bottlenecks.
• Meanwhile, a further surge in coronavirus cases in Beijing ignited fears of an economic slowdown amid supply chain concerns. Worries about tightening global financial conditions and the potential impact on economic growth similarly weighed on Japanese sentiment. Further losses in the U.S. tech space also hurt investor confidence.
• On Friday, however, Japanese equities rallied after Wall Street closed sharply higher overnight. Optimistic retail earnings outlooks and waning concerns about overly aggressive interest rate hikes by the U.S. Federal Reserve put investors in a buying mood. Chinese markets weakened amid concerns over slowing growth exacerbated by the government’s zero-tolerance approach to the coronavirus. Data revealing that profits at China’s industrial firms fell at their fastest pace in two years in April also weighed on sentiment.
• Shanghai gradually eases lockdown restrictions, but economic concerns persist Worries about a prolonged slowdown grew more prominent after Premier Li Keqiang held a rare video call with thousands of government officials in which he reportedly warned of dire consequences for China’s economy if they didn’t take measures to reverse the slowdown.
• Chinese officials are reportedly conflicted between the views of President Xi Jinping, who continues to emphasize the country’s zero-COVID policy, and Premier Li Keqiang, who last week called for a better balance between pandemic controls and economic growth.
• China’s debt-laden property developers continued their efforts to emerge from a liquidity crisis. Evergrande Group is considering repaying its offshore public bondholders with cash installments and equity in two of its Hong Kong-listed units, Reuters reported.
• Meanwhile, Greenland Holdings, a mid-size developer long regarded as one of the strongest players in China, asked holders of a USD 488 million note due June 25 to delay repayment by a year, triggering a sell-off in its bonds.

What to watch this week:

• Canada GDP and trade data
• Bank of Canada policy announcement
• US Federal Reserve’s Beige Book
• US employment data
• Eurozone consumer confidence, inflation, and retail sales data
• OPEC+ meeting
• Global Purchasing Manager Indices, including US ISM

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

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