“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