Recap: Week Ending August 15, 2014

August 15, 2014

Equity markets continued to grind higher despite late week geopolitical threats from Eastern Europe. Markets continued to rebound following the late July selloff which erased all gains made for the month of July. The selloff was caused by news out of Argentia of a potential Government default. News of the default has since fizzled out, and the market has turned its attention to regaining lost ground. With this being said, traders and investors alike still have their eyes fixed on the crisis in Ukraine as Russia continues to maintain a dominating presence.

The economic Calendar for both the United States and Canada was fairly light as markets enter the dog days of summer when many traders and investors have taken time off. Trading volumes for the month of August have been relatively low creating a low volatility environment. This is especially seen in the Toronto Stock Exchange Composite Index, TSX, which traded within a 150-point range this past week. With this being said, it appears that the Canadian benchmark index has found support at its 50 day simple moving average and is looking slowly to recoup losses which were seen at the end of July.

Monday saw the release of the Canadian Housing Starts for the month of July. The figure came in at 200.1k, beating the consensus of 193K and the previous reading of 198.7K. This caused some bid activity in the TSX causing the index to close higher on the day. Stateside saw the both a 3-month and 6-month Bill auction. The 3-months for were auctioned off at 0.03%, higher than their previous auction yield of 0.025%. Meanwhile, the bidders of the 6-month Bill will receive 0.05% for their securities. This recent 6-month auction yielded the same result as the previous with no change in yields. Like the TSX, the Dow closed higher Mondays, however, volatility was muted.

Tuesday was even quieter on the economic calendar with little news of any importance being released. The TSX was able to close higher Tuesday while and Dow closed lower on the day, however, losses were minimal.

Wednesday saw nice bid activity in the Dow as Retail Sales for July missed expectations coming in at 0.0% vs. the consensus of 0.2% and the prior reading of 0.2%. The miss caused buyers to step into the market as the weaker figure signaled the economy may not be able to withstand an increase in interest rates as soon as earlier predicted. The TSX was unable to match gains made in the US and closed lower on the day.

Thursday saw yet another day of upside for US markets. Markets rallied on the larger than expected Initial Jobless Claims which came in at 311K vs. the prior reading of 290K. The New Housing Price Index Year over Year was released for the Canadian housing market. The figure came in unchanged from its prior reading of 1.5%. This figure provided some bid to the Toronto markets, however, upside was limited.

Friday was by far the most-volatile day for the markets with news breaking midday of more geopolitical tensions in Eastern Ukraine. Ukraine is stating that they were able to track Russian military troops entering their country; however; Russia is coming on the defence saying Ukraine is incorrect. This move comes as Ukraine denied Russia aid trucks to enter its country as many feared that these trucks were simply lined with Russia army equipment not aid as originally stated. The situation in Eastern Ukraine appears to be far from over and looks like more market moving news could be breaking in the near future. Both the Dow and S&P 500 closed the day lower while the NASDAQ 100 closed higher.


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