Recap: Week Ending December 4, 2015

December 5, 2015

After a week of volatile trade, North American equity markets finished the week mixed as unemployment figures for the month of November set the tone for the upcoming US interest rate decision. Last week the NASDAQ 100 Index led the way higher, closing the week up 0.76% to settle Friday at 4,716.12. With this being said, the presence of buyers on the same level was not felt across the board as the S&P 500 only settled the week higher by a marginal gain of 0.08%. The lack of upside seen in the S&P comes as markets were whipsawed last week by news out of major central banks. On Thursday, the European Central Bank, or ECB, announced a much smaller than anticipated monetary expansion policy. The market was under the belief that a more aggressive policy would be set in place. However, the ECB cut its deposit rate from -0.2% to -0.3% as well as extend its asset-buying program for a further six months. As a more aggressive policy was priced into the market, the EUR/USD rallied 3% as equities across the globe sold off. The 3% move in the EUR is the third largest one-day rally that the currency has ever seen. The strong effects of the EUR spilled over into North American markets where equities as well as bonds sold off, similar to their European counterparts. With this being said, a large push to the upside on Friday following US unemployment for the month of November erased any losses seen in the previous day and put many indexes back into the green for the week. The US unemployment rate held steady at 5% from the previous month; this result was expected by a survey conducted among economists. It must be noted that payrolls for the month of October were revised higher. Furthermore, average hourly earnings for November on a year over year basis came in at 2.3% vs. a previous reading of 2.5%. There was no economists’ consensus for this economic indicator. Average hourly earnings are a very good indicator of inflation in the economy. As this indicator is falling on a year over year basis, many are questioning the true strength of inflation. The unemployment rate showed that the economy is improving and as many view it, giving the Federal Reserve the opportunity to raise interest rates in two weeks. With thing being said, many feel that the slow rate of growth will indeed slow down the rate hike cycle to one much slower than that of previous cycles. Because of this equities caught a bid on Friday and were able to settle the week on a higher note.

North of the border, the Toronto Stock Exchange Composite Index, or TSX, was unable to move higher with the same force on Friday like its neighbours to the south putting the index in the red for the week. Last week the Canadian benchmark index fell 0.07% to settle Friday at 13,358, below its 50-day moving average and 200-week moving average. The index was rocked last week by a very volatile price of oil. Last week saw an OPEC meeting where members were unable to agree on an output ceiling level of production. As a result, the price of the energy product tumbled $1.63 or 3.90% to settle the week at $40.14. As the TSX is made up of many constituents who are dependent on higher energy prices of profit, the TSX was weaker. Even though these lows in the energy product are extreme, they are still not the lowest levels seen this year. Back in August the price of crude traded down to a low of $37.75 before rallying to prices just shy of $49. Since then crude has traded in a sideways chop for the majority of the time before trending downwards to its current levels seen last week. However, one must take note that the move lower in crude last week breaks a two-week weeks were gains were seen.

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