Weekly Market Update (October 30 – November 3, 2017)

November 5, 2017

Large-cap American stocks edged higher on Friday, resulting in the eighth consecutive week of record highs in the U.S stock market – a feat that has not been achieved since 2006. The S&P 500 closed October with another solid gain hitting 2,587, marking its 10th month so far with a positive total return. Markets were supported further Friday, following Apple’s staggeringly positive earnings release, with the tech giant growing revenues by 12% from Q4 fiscal 2016. This years Q3 earnings season is slowly coming to a wrap, with over 80% of all index constituents having already reported their results. The Fed announced Wednesday (Nov. 1) that they would not change the federal funds rate – keeping it at 1.25%. They stated that despite the Hurricane disruptions, economic activity been rising at a solid rate and inflation has stayed at a relatively good rate. Nonfarm payroll and unemployment, two major employment statistics were released later in the week, with nonfarm payroll hitting 261k for October and unemployment reaching a 16-year low of 4.1% – further supporting the Fed’s statement. President Trump nominated Jerome Powell for the Federal Reserve Chair, who will replace the incumbent Janet Yellen when her term expires in 2018. Markets didn’t react to the announcement Thursday afternoon, as Powell is known to share views closely aligned with Yellen. The U.S House of Representatives released their first tax reform proposals. Corporate tax cuts were the main object of the proposal, with the bills stating possible corporate tax rate cuts from 35% to 20%.

The TSX crossed 16,000 for the first time in history this week, closing higher at 16,020 – the Canadian market’s second week in a row reaching record highs. This marks the eighth consecutive week of gains for the TSX, which has not been seen since the end of 2005. Canada has lagged behind almost all other major world markets, as most have hit record levels with Canada only joining in now. Canada Natural Resources had the most support for the current rally, rising 1.63% to $46.01 at close. Oil prices continued to rise, hitting over $55 a barrel causing the energy sector to post the highest gains for the week. A strong employment report bolstered the Canadian market, with Stats Canada announcing that 35k jobs were added in October. Earlier in the week investors showed worries in the Canadian market following the August GDP (MoM) release of -0.1% which signalled a possible slowing economy. Gains in the TSX, paired with a rise in oil prices and positive employment data strengthened the loonie against the greenback with the pair trading an average price of 78.25 cents U.S.

European markets were marginally higher for the week following strong economic data. Spanish stocks especially saw a slight rise as the Catalan political risk eased in the region. Catalan separatist leader “Puigdemont” fled to Belgium after the Spanish government seized the Catalan region, leaving the independence movement unguided. The Bank of England raised interest rates from 0.25% to 0.50% which was expected. This is the first increase in the United Kingdom in over 10 years. Japan kept its interest rate policy untouched during its central bank meeting, leading to a slightly weaker Yen. The Nikkei climbed to another 20-year high after the Bank of Japan’s policy meeting.

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