ClearWater Market Commentary as of October 8th, 2021

Here is the ClearWater Market Commentary as of October 8th, 2021:

In this issue:
– Performance of Major Indices
– Market Commentary
– Last Week’s Key Economic  Events and Upcoming Events

Performance of Principle Indexes: 

^{As of 2021/10/08- Source: www.marketwatch.com}

^{As of 2021/10/08- Source: www.marketwatch.com}

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

US economy (S&P 500 0.79%):

• Most of the major benchmarks recorded gains, with the S&P 500 Index recovering a portion of the previous week’s losses.
• Energy stocks led the gains as natural gas prices reached record highs in Europe and major oil exporters decided not to increase production more than their modest previously agreed-upon amount, sending crude oil prices to a seven-year high on Monday.
• The week started on a down note, largely attributed to: Debt ceiling worries mounted as President Joe Biden said he could not guarantee that the U.S. would not default; Facebook and a host of related Web services went offline; inflation concerns; Debt problems at another Chinese property developer also dampened sentiment.
• Worries over the debt ceiling were also alleviated late in the week, at least temporarily. Stocks rallied on Thursday, following reports that Senate Republicans had agreed to take up a bill to raise the Treasury’s borrowing limit by USD 480 billion, which would allow the federal government to keep paying its bills through at least early December.
• The highly anticipated monthly payrolls report received a mixed reaction in markets when it was released Friday morning as it appeared to foster a rise in longer-term bond yields later Friday morning. The yield on the benchmark 10- year U.S. Treasury note briefly neared 1.62%, its highest level since early June.

Canadian markets (S&P/TSX 1.32%):

• Canada’s main stock index closed essentially unchanged Friday even as crude oil prices surpassed US$80 for the first time in seven years and a strong September jobs report saw employment return to pre-pandemic levels for the first time.
• 157,000 jobs were gained in September while the unemployment rate dipped to 6.9%.
• Current employment reports likely signal that the Bank of Canada will further taper its bond-buying later this month. However, concerns about inflation still persist.
• The month of October continues to be strong after a rough September, with both energy and materials leading the way.

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

European and Asian economies:

• Shares in Europe ended higher despite significant volatility on inflation concerns stemming from the surge in natural gas prices hitting record highs and concerns on the U.S. debt ceiling debate.
• Wholesale natural gas prices surged to record levels in Europe amid global fuel shortages, threatening to increase costs significantly for households and to curb industrial production. Stronger global demand as economies reopened after the pandemic, lower Russian supplies to Europe, greater competition from Asia and Brazil for liquefied natural gas cargos, and depleted reserves after a cold winter and spring were among the many reasons cited for the shortage.
• Prices declined somewhat after Russian President Vladimir Putin hinted that Gazprom, Russia’s state-backed gas company, might increase supplies of the thermal fuel to Europe. 
• European Central Bank (ECB) policymakers viewed the recent surge in inflation as temporary but acknowledged further “upside risks.”
• In speeches during the week, ECB officials diverged over the official forecast, which sees inflation abating next year. ECB President Christine Lagarde reiterated that “we should not overreact to supply shortages or rising energy prices, as our monetary policy cannot directly affect those phenomena.”
• Poland’s central bank unexpectedly raised interest rates for the first time in almost a decade to quell a surge in inflation, boosting its key rate 40 basis points to 0.5%. The move follows hikes in the Czech Republic, Hungary, and Romania.
• In Japan, against the broader backdrop of worries about global inflation, oil prices, and the Chinese property market, stock markets lost ground for the third week in a row.
• Share price declines were also due to investors’ concerns about the prospective policies of newly inaugurated Prime Minister Fumio Kishida; these stemmed largely from Kishida indicating that he might support a capital gains tax increase, which could be perceived as a step back from efforts to make Japan more shareholder-friendly.
• Kishida, who won the race to lead Japan’s ruling Liberal Democrat Party (LDP) following the resignation in September of predecessor Yoshihide Suga, was confirmed as the country’s 100th prime minister.
• Delivering his first policy speech, Kishida outlined his strategy to spark economic growth and to redistribute the fruits of that growth to build up a stronger middle class. He will continue to push for Japan to emerge from deflation, and he identified the “three arrows” from economic plans developed under former Prime Minister Shinzo Abe.
• The Bank of Japan (BoJ) downgraded its economic assessments on five of the country’s nine regions, citing the lingering impact of the coronavirus pandemic and supply shortages that have hit manufacturers.
• Chinese markets rose Friday following the week-long Golden Week holiday. Investors looked past the government’s regulatory crackdown, property sector turmoil, and a nationwide power crunch and focused on positive economic data.
• On Friday, Beijing ordered an immediate increase in coal output to fight the nationwide power crunch, Reuters reported. China has been gripped by power shortages, which hurt production in industries across several regions of the world’s second-largest economy.
• News from the property sector continued to dominate investor concerns after developers reported sharply lower sales for September, with more announcements of missed debt payments. Fantasia Holdings, a small developer, said that it failed to pay a USD 206 million debt shortly after a subsidiary missed paying an RMB 700 million loan on the due date.
• Separately, Sinic Holdings said its subsidiaries said that it had missed interest payments on certain financing arrangements, which resulted in a rating downgrade from Fitch.
• China Evergrande, the cash-strapped developer that has dominated headlines about a possibly chaotic collapse, reportedly missed payment on a debt guaranteed by the company after having already missed two coupon payments in the past two weeks.

What to watch this week:

• Japan Producer Price Index (September).
• U.S. Consumer Inflation Expectations (September).
• U.S. Inflation Rate (September).
• U.S. FOMC Minutes.
• China Producer Price Index (September).
• U.S. Producer Price Index (September).
• U.S. Retail Sales (September).

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

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