Recap: Week Ending October 9, 2015

October 10, 2015

Equities across the globe soared higher last week as all major indexes followed by MarketWatch closed in the green on the week. In Canada, the Toronto Stock Exchange Composite Index, or TSX, moved higher by 4.68% to close Friday at 13,964.36. Out of the last eight trading days, the TSX has only fallen two of those. The move higher in the Canadian based index can be attributed to the massive push higher in the price of North American crude oil. Last week crude rallied $3.83 or 8.39% to settle Friday at $49.49. The levels which crude is currently trading at have not been seen since the middle of July. The move is significant for the energy product as it appears that price is breaking out of a sideways channel that it has established over the course of the past few months. From a technical analysis standpoint, the price on the daily timeframe has hit its 200-day simple moving average, an indicator that is strongly known in the industry as resistance. Another lift to the TSX was the bid activity seen in gold, which like crude has been taking a beating as of recently. Last week the price of gold rallied $18 or the equivalent of 1.58%. With this being said, despite the move higher, gold remains in a well-defined sideways channel that it has established over the course of the summer. The story has been not only strong commodities but also a strong Canadian dollar. Out of the last eight trading days, the Loonie has only fallen once against the US Dollar. In recent months, the Canadian Dollar has taken a large hit against its US counterpart as the Federal Reserve discusses raising interest rates, and the Bank of Canada takes actions to lower rates. Like the bullish commodities complex, the stronger Canadian Dollar assisted the TSX in its liftoff last week. Last week the US Dollar Index, which represents a basket of currencies against the US currencies, fell 1.13%. If the index continues to be weak, signifying weakness across the board for the US Dollar, the Loonie and the TSX could continue to see upside action.

 

Despite the upside action seen in the Canadian equity markets, the week was overshadowed by a weak unemployment figure Friday. Unemployment for the month of September came in at 7.1%, vs. a previous reading of 7% and a consensus estimate by economists was 6.9%. However, there was a net positive change in employment from a previous reading of 12K to 12.1K. The figure for September also beat the consensus reading of 10K. The very important labour force participation rate came in unchanged from the previous month at 65.9%, showing that the number of people looking for work and leaving the labour force did not change in the month of September. Surveyed economists were expecting a reading of 65.8%.

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