ClearWater Market Commentary as of September 13th, 2021

Here is the ClearWater Market Commentary as of September 13th, 2021:

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	-0.90%
1 Month	0.56%
YTD	18.35%
1 Year	27.19%

^{As of 2021/09/10- Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
Nikkei 225	2.66%	10.94%
Shanghai Composite	2.58%	6.98%
S&P/TSX Composite	0.05%	43.50%
Russell 2000	-0.37%	21.02%
FTSE 100	-0.90%	18.35%
CAC 40	-1.05%	14.91%
Hang Seng Index	-1.34%	-5.20%
Oil ($/bbl)	-1.44%	9.65%
Nasdaq	-1.61%	17.28%
DAX	-1.69%	18.70%
S&P 500	-2.15%	13.07%
Dow Jones Industrial	-2.73%	13.06%

^{As of 2021/09/10- Source: www.marketwatch.com}

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

US economy (S&P 500 -2.15%):

• The major indexes retreated over the shortened trading week—markets were closed on Monday in observance of Labor Day.
• The small-cap Russell 2000 Index fared worst after two consecutive weeks of outperforming the large-cap benchmarks, and value stocks trailed growth shares.
• There were several factors weighing on sentiment, including September’s reputation for being a weak month for stocks. The previous week’s significant August payrolls miss seemed to linger in the minds of investors and exacerbate worries that the delta variant of the coronavirus was slowing the economic rebound.
• On Thursday afternoon, President Joe Biden announced that all large employers must require workers to either be vaccinated or submit to weekly testing, while vaccination would be mandatory for federal workers and contractors.
• While evidence continued to emerge that the latest coronavirus wave was peaking, health officials warned that the return to school and Labor Day social gatherings might derail progress.
• Biden’s stimulus plan faces new hurdles as federal debt ceiling looms. There is a widening gap between moderates and progressives regarding how much to approve, which weighed on markets.
• Finally, inflation worries may have continued to weigh on sentiment.

Canadian markets (S&P/TSX -0.90%):

• Canada’s main stock index moved lower on economic growth concerns, while the loonie fell after the Bank of Canada warned of risks but left interest rates unchanged. The mid-week market decrease however was more of a ‘run of the mill pullback’ which is to be expected.
• Some of this volatility is likely attributed to seasonal factors.
• The loonie fell after the Bank of Canada warned about risks even as it kept its interest rate unchanged. The Canadian dollar traded for 78.89 cents US compared with 79.23 cents US on Tuesday.
• The Bank of Canada (BoC) however last week, for its part, made no changes to policy but did change their language around inflation.
• The Bank’s statement once again highlighted “base-year effects, gasoline prices, and pandemic-related bottlenecks” are pushing inflation higher. The BoC’s assessment of inflation is that these “are expected to be transitory”.
• The BoC is widely expected to continue its tapering in October (cutting bond purchases (QE) from $2 billion to $1 billion but overall will be buying bonds for some time.
• Canada’s economy finished a sizzling summer by adding 90,200 jobs in August, the third consecutive monthly increase that brought the country as close as it has been to recouping historic employment losses last year.
• The unemployment rate fell to 7.1 per cent for the month, compared with 7.5 per cent in July, bringing the rate to the lowest level since the onset of the pandemic last year.

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

European and Asian economies:

• Shares in Europe weakened amid uncertainty about the economic outlook, the continuing coronavirus pandemic, and central bank policy.
• Core eurozone bond yields ended slightly higher, paring earlier gains, after European Central Bank (ECB) President Christine Lagarde said the decision by the central bank to trim its emergency bond purchases was not tapering.
• ECB to trim pandemic bond purchases as they have decided to move to a “moderately lower pace” of bond purchases under its Pandemic Emergency Purchases Programme for the rest of the year, after a rebound in European growth and inflation.
•  Lagarde said that the central bank was not tapering its stimulus. “What we have done today … unanimously, is to calibrate the pace of our purchases to deliver on our goal of favourable financing conditions. We have not discussed what comes next,” she said.
• Lagarde remained cautious on the economic outlook, saying, “We are not out of the woods.” The risks to the outlook are “broadly balanced” and “price pressures are building only slowly.”
• UK Prime Minister Boris Johnson secured parliamentary approval for tax increases to fund changes to social care and the National Health Service.
• Under the plan, some investors will face higher levies on dividends, while the national insurance contributions taken out of paycheques will also increase.
• BoE officials also maintained that some modest tightening was likely over the forecast horizon.
• In other news, The European Commission (EC) said it planned to launch green bonds in October to fund environmental projects as part of an effort that aims to raise up to EUR 250 billion through 2026. Eleven member states have already issued green bonds, while another four plan to do so.
• Japanese equities extended their gains over the week, buoyed by political optimism and expectations of further fiscal stimulus under a new prime minister.
• With markets expecting further fiscal stimulus under a new prime minister, the Bank of Japan (BoJ) rates will remain low to enhance the effect of fiscal policy.
• Chinese stocks rose for the third straight week. Strong trade data and an unexpected yet reportedly candid phone conversation between the U.S. and Chinese presidents lifted investor sentiment. 
• On the economic front, inflation data continued to show elevated producer prices and subdued consumer prices, which have been restrained by lower fuel and pork prices. 
• The producer price index (PPI) rose 9.5% in August from a year ago mostly due to higher commodity prices that have been a major driver of inflation this year.
• August’s PPI reached a 13-year high, according to Bloomberg. The recent acceleration in China’s PPI is a growing concern for the government since the widening gap between producer and consumer prices could signal pressure on domestic manufacturers’ profit margins.
• In other news, China plans to integrate Hong Kong’s economy more closely with the “Greater Bay Area”, a cluster of cities in Guangdong province’s Pearl River Delta that Beijing wants to transform into an economic powerhouse.

What to watch this week:

• Canadian housing data
• Chinese fixed asset investment data
• Japanese and Eurozone trade data
• UK employment data
• Globally: retail sales, inflation and industrial production data

• 

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

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