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Category Archives: Economy

Frank Mueller

Weekly Update – August 11, 2017

“Genius is a short memory in a bull market” – J.K. Galbraith

TSX Drops on Financial & Telecom Selloff

The Toronto Stock Exchange’s S&P/TSX composite index ended Friday down 40.87 points, or 0.27% to finish the week at 15,033.38. For the week, the TSX was down 224.59 points, or 1.47%, from last week’s close of 15,257.97.

The decline was broad, with 6 of the TSX’s main 10 groups posting losses on the day. In particular, the Financials group dropped 0.4%, and the Telecoms group was pulled down by some lower-than-expected earnings from major telecom company Telus.

The Materials group lost 0.6% on Friday, but the Energy group was relatively flat.

Oil prices sagged this week, with a barrel of West Texas Intermediate crude oil falling 1.5% for the week, while Brent crude oil dropped by 0.6% this week. Although U.S. crude inventories fell by 6.5 million barrels, analysts were quick to point out the seasonality of the decline.

The Loonie rose by 47 basis points to finish the week at 78.91 cents against the Greenback, though on the week, the Loonie suffered a slight drop versus last week’s finish of 79.02 cents.
Gold rose to $1,296.60 USD per ounce on Friday, up 3.35% for the week.

Tensions with North Korea Weigh on Stock Markets

Increasingly aggressive posturing by the North Korean and U.S. leaders had an impact on the markets this week, with most U.S. indexes posting losses from Tuesday through Thursday, before a small rally on Friday.

Earlier in the week, President Trump threatened to “unleash fire and fury” upon North Korea. The North Korean dictatorship responded in kind by threatening to launch a missile at Guam, a U.S.-held territory in the Pacific Ocean. Today, Trump tweeted that “Military solutions are now fully in place, locked and loaded, should North Korea act unwisely”.

The U.S. markets were also affected by soft inflation figures, and analysts pointed out that the U.S. Federal Reserve may act more cautiously toward further rate increases in the near future, a positive piece of news for equity investors. Reuters has reduced the odds of a December rate hike to 28%, down from 46% as of last week.

The inflation numbers did have a downward pull on the Greenback, as it lost ground against many foreign currencies.

The S&P 500 Volatility Index (VIX) hit 9-month highs in the wake of the North Korean/U.S. tensions.

Sources: Thomson Reuters DataStream, Globe Advisor

Frank Mueller

Weekly Update – August 4, 2017

“The biggest problem is not to let people accept new ideas, but to let them forget the old ones” — John Maynard Keynes

TSX Rises, Jobs Growth Keeps Rate Hike Door Open

The Toronto Stock Exchange’s S&P/TSX composite index closed at 15,257.97, up 0.43%, or 66.01 points on Friday. The Friday closing number represents a 0.85% increase on last week’s finishing mark of 15,128.65.

Decreased energy shipments pulled Canadian exports down in June, further widening the trade gap; however, strong and sustained jobs growth is keeping the door open for further rate hikes in 2017. The export numbers, however, did weigh on the Loonie on the way to a close of 79.02 cents U.S., down .39 of a cent.

Gold futures dropped 1.1% to $1,254.5 per ounce, which weighed on Gold miners both north and south of the 49th.

Crude oil rose by 49 cents (USD) to close at $49.52 per barrel, although the data showed strong U.S. output and rising OPEC output which might usually lead to a drop in oil pricing.

Strong U.S. Jobs Report for July & Notes on Earnings Season

The non-farm payrolls number increased in July by 209,000 jobs, beating the street expectations of 183,000 jobs. In addition, the June jobs numbers were revised upward, from 222,000 jobs to 231,000 jobs.

U.S. unemployment dropped to 4.3%, although it should be noted that “unemployment” figures do not count employable people who are not actively looking, or who have been actively looking for over a year. Still, 4.3% is a respectable figure.

The potential knock-on effect of the strong jobs figures was felt as analysts increased the odds of a December rate hike from 46% to 50%. The Federal Reserve may also consider shrinking its $4.5 Trillion bond portfolio starting in September.

Although the S&P 500 is currently trading at 18 times expected earnings (the 10-year average is 14 times earnings), the strong earnings season has partially mitigated fears of over-valuation. The S&P 500 closed Friday at 2,476.83, a modest increase of 4.67 points, or 0.19%.

The Dow Jones Industrial Average (DJIA) rose above 22,000 for the first time ever on Wednesday, amidst hitting record highs for 8 straight days as of Friday. The DJIA closed Friday at 22,082.12.

Sources: Thomson Reuters DataStream, Globe Advisor