ClearWater Market Commentary as of September 8, 2023

Here is the ClearWater Market Commentary as of September 8^th, 2023:

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	-2.29%
1 Month	-1.63%
YTD	3.56%
1 Year	1.52%

^{As of 2023/09/08- Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
WTI Crude (Oil)	2.00%	8.70%
FTSE 100	-0.55%	4.20%
Hang Seng Index	-0.58%	-7.68%
Down Jones Industrial	-0.70%	4.30%
DAX	-1.02%	13.85%
Nikkei	-1.13%	11.80%
CAC 40	-1.16%	12.64%
Shanghai Composite	-1.18%	-0.59%
S&P 500	-1.30%	16.10%
MSCI EAFE	-1.40%	6.70%
NASDAQ	-1.90%	31.50%
S&P/TSX Composite	-2.29%	3.64%
Russell 2000	-3.61%	5.13%

^{As of 2023/09/08- Source: www.marketwatch.com}

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

US economy (S&P 500 -1.30%):

• Stocks closed lower over the holiday-shortened week as some positive economic signals drove an increase in interest rates. Growth stocks fared better than value shares, and large-caps outperformed small-caps by a wider margin.
• A decline in Apple, the most heavily weighted stock in the S&P 500 Index, drove part of the declines after news that Chinese government employees would no longer be able to use iPhones. Investors also may have been discouraged by reports that the upcoming iPhone 15 will be significantly more expensive than current models. Declines in NVIDIA and other chipmakers also weighed on the indexes. Markets were closed Monday in observance of the Labor Day holiday.
• The week’s economic calendar, while not especially heavy, seemed to drive sentiment by generally surprising on the upside. The standout appeared to be the Institute for Supply Management’s report on August services sector activity, which jumped unexpectedly to its highest level since February. The report indicated that new orders were growing at a faster pace, although order backlogs fell sharply, and inventories had risen considerably. Export orders also remained healthy, although worries grew during the week about a sharp slowdown in the Chinese economy.
• Meanwhile, Thursday’s weekly jobless claims report came in lower than expected, indicating continued strength in labor demand despite August’s solid increase in the unemployment rate (from 3.5% to 3.8%). Defying expectations for a small increase, the number of Americans applying for unemployment in the previous week fell to 216,000, the lowest level in six months. Continuing claims fell to 1.68 million, the lowest level since mid-July.

Canadian markets (S&P/TSX -2.29%):

• Canada’s main stock index posted a small loss Friday, with broad-based weakness led by metals and tech, while U.S. markets eked out slim gains amid ongoing concern about interest rates.
• After a weaker August following a tech-driven rally in the first half of the year, markets seem to be under pressure heading into September, with the issues weighing on markets being the ongoing realization that interest rates will likely have to stay higher for longer.
• The Bank of Canada (BoC) held overnight rates steady at 5.00% after back-to-back 25 bps hikes in the prior two meetings.
• The latest Canadian labour market report showed more jobs were added to the economy than expected in August, while the jobless rate held steady at 5.5 per cent, ending a three-month streak of rising unemployment.
• But investors were much more taken aback by the latest GDP numbers for Canada’s second quarter, which posted a surprising contraction last week.
• Canada’s merchandise trade deficit (Jul.) narrowed to $0.99 billion (versus $3.53 billion expected), from an upwardly revised $4.92 billion in the prior month. Exports rose 0.7% m/m, while imports fell 5.4%.
• Overall, the markets are struggling with a mix of economic data, longer-term interest rate expectations, and concerns about a weakening consumer.
• The Canadian dollar traded for 73.36 cents US compared with 73.13 cents US on Thursday.
• The October crude contract was up 64 cents at US87.51 per barrel and the October natural gas contract was up three cents at US$2.61 per mmBTU.
• The December gold contract was up 20 cents at US$1,942.70 an ounce and the December copper contract was down five cents at US$3.72 a pound.

Forward P/E Ratios: S&P 400/500/600 Sectors

Performance 2023: S&P 500

European and Asian economies:

• In local currency terms, major indices were mixed for the week.
• A string of economic data provided more signals that the eurozone economy continues to stumble. Gross domestic product (GDP) in the bloc grew 0.1% in the second quarter, as a drop in exports contributed to Eurostat’s downward revision of its initial estimate of a 0.3% expansion.
• Retail sales volumes in the eurozone fell 0.2% sequentially in July, reflecting weaker automotive fuel purchases. The year-over-year decline was 1.0%.
• Investor morale in the eurozone fell more than expected at the start of September, with Sentix’s index tumbling to -21.5 from -18.9 in August. Sentix said that a deepening slowdown in Germany was weighing heavily on sentiment.
• German industrial production in July fell for a third month running, by a greater-than-expected 0.8% sequentially. The decline was driven by a 9% drop in auto manufacturing.
• Bank of England (BoE) Governor Andrew Bailey cast doubt on a possible hike in UK interest rates at the upcoming September 21 policy meeting. He told a parliamentary committee: “I think we are much nearer now to the top of the [interest rate] cycle.” Referring to the decision, he said: “The judgments now are much finer [than before].”
• Japan’s stock markets registered mixed performance over the week. Concerns about China’s economic slowdown and the impact on global demand weighed on investor risk appetite.
• Some weak economic data releases suggested that Japan’s economy was not doing as well as previously thought, with a downward revision to second-quarter economic growth weighing on sentiment. Japan’s second-quarter 2023 gross domestic product expanded 4.8% quarter on quarter on an annualized basis, weaker than preliminary estimates of 6.0% growth. Capital spending, private consumption, and public investment were all softer than anticipated.
• On the political front, speculation grew during the week about a potential Liberal Democratic Party (LDP) leadership and cabinet reshuffle by Prime Minister Fumio Kishida, with several news agencies reporting that a revamp could take place as soon as the week beginning September 11. Kishida is reportedly aiming to maintain stability within the LDP as he positions himself to be re-elected as party leader next year, and many of the party’s most influential members are expected to retain their positions.
• Chinese stocks retreated as the latest economic indicators reinforced concerns about the country’s weakening outlook.
• The private Caixin/S&P Global survey of services activity fell to a below-forecast 51.8 in August from July’s 54.1. Although the gauge remained above the 50 threshold, indicating expansion for the eighth consecutive month, it was the slowest increase since December as poor demand continued to drag on China’s economy. The reading was broadly in line with the prior week’s nonmanufacturing Purchasing Managers’ Index (PMI), which also eased to the lowest level this year. The official manufacturing PMI remained in contraction for the fifth consecutive month but came in slightly above expectations.
• On the trade front, China’s exports fell 8.8% in August from a year earlier, softening from the sharp 14.5% drop in July. Imports shrank by 7.3%. Both readings were above expectations. Some economists viewed the data as a sign that some sectors in China’s economy may be bottoming out after the government recently issued a flurry of policy measures aimed at boosting demand.
• China’s renminbi currency fell to a record low of 7.36 against the U.S. dollar in overseas trading after the central bank set its yuan fixing rate at a two-month low. The exchange rate fell below the psychologically important level of 7.35 and close to the weakest since the inception of the offshore market in 2010. Pessimism about China’s economic outlook and signs of resilience in the U.S. economy have contributed to the interest rate differential between the two countries, which has increased downward pressure on the renminbi.

What to watch this week:

• Canadian National Balance Sheet and Financial Flow Accounts (Q2)
• Canadian housing data
• US inflation, retail sales, and industrial production data
• ECB policy announcement
• Chinese industrial production, fixed asset investment, money supply and aggregate yuan financing data
• UK GDP, employment, trade and industrial production data

• 

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

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