“The Investor, unlike the Speculator, does not have to worry too much about the short term” – John Train

Broad Retreat Leads TSX Lower

The Toronto Stock Exchange’s S&P/TSX composite index continued its recent trend of staying relatively flat. On Friday, the TSX finished down 20.27 points, or 0.13% to finish at 15,191.60. 9 of the 10 main index sectors dropped on Friday. Only the energy sector finished in positive territory on Friday. Within the financial sector, positive movers included Toronto-Dominion Bank, Canadian Western Bank and Alaris Royalty Corp all advancing.

The Canadian Dollar gained for the week, and rose 63 basis points to finish at 80.68 cents (USD).

Surprisingly, given the goings on in Texas with Tropical Storm Harvey, West Texas Intermediate (WTI) finished down for the week at $47.35 (USD) per barrel, though it did rise Friday by 26 cents.

Spot Gold rose to a 10-month high to close at $1,324.46 USD per ounce on Friday after U.S. job growth numbers slowed in August. Gold Futures finished with a 0.6% gain, at $1,330.40 per ounce.

Tropical Storm Harvey Hammers Texas and North Korea Test Missile Launch – Wall Street Relatively Unchanged

Tropical Storm Harvey touched down in Texas late last week, and the city of Houston is almost entirely flooded. On Monday, energy and bank shares dropped, as the Harvey pummelled a key American energy hub; however, Wall Street, by-and-large, was unaffected.

Crude oil was heavily pressured this week, with flooding and damaging from Harvey forcing a shutdown of more than 20 per cent of U.S. refineries, curbing demand for oil, while raising the risk of fuel shortages. On a positive note, Harvey appears to be losing steam as it moves inland.

On Thursday, U.S. stocks and Treasury prices were pushed higher on economic data showing U.S. inflation rose at its lowest pace since late-2015. This news boosted expectations that the Federal Reserve will hold off on rate hikes during the remainder of 2017.

In global news, North Korea fired a test missile over Japan’s Hokkaido Island on Tuesday, leading to a sharply down open, but U.S. markets rebounded throughout the day as concern over North Korea quickly faded. While U.S. President Donald Trump did say “all options are on the table” when dealing with the North Korean threat, his focus has primarily been on Tropical Storm Harvey; this likely helped ease U.S. markets’ worries.

The MSCI’s World Index, on the other hand, tracked international worries to North Korean missile test. The World Index, which tracks 46 countries, was down 0.29% on Tuesday.

Strong Canadian GDP Data Could Lead to September Rate Hike

The Canadian economy exceeded growth expectations during Q2, with an annualized growth rate of 4.5%. According to Statistics Canada, 2017 has seen the best start to a calendar year since 2002.

Exports – mainly energy products – and household spending were the main factors leading to the real GDP increase. For the first half of the year, the Canadian economy grew by an annualized 4%, a “stunning” figure, according to National Bank senior economist Krishen Rangasamy, who added “(we need) to go back to 2011 to see such a strong semester of growth”.

Mr. Rangasamy said that an increase in real disposable income helps to explain the surge in household spending.

The Bank of Canada (BoC) has 3 more rate announcement dates scheduled for 2017: September 6, October 25, and December 6. Avery Shenfeld, chief economist at CIBC Capital Markets, believes that the Q2 economic data may lead the BoC to announce a rate hike next week (September 6th). Analysts initially felt that the October 25th announcement would be the likely date to announce a rate hike, but the strong Q2 economic data may have pulled in the timing to the September announcement.

A further rate hike would likely lead to an appreciation of the CAD versus the USD.

Sources: Thomson Reuters DataStream, Globe Advisor, BNN, Advisor.ca