Weekly Market Update (January 01 – January 05, 2018)

January 7, 2018

American markets started the New Year off to a good start, following the incredible 2017 performance. The S&P 500 closed December positive again, posting gains in all 12 months of the 2017 year. All major indices reached new highs, over the first trading week of 2018 – leading markets to a strong start. The Dow Jones Industrial Average passed the 25,000 mark on Thursday – less than a year after the index passed the 20,000 milestone. U.S. market volatility appeared to begin subsiding, after the VIX (Volatility Index) hit a record low on Wednesday. Energy stocks in the American markets led the gains of the indices, after a strong rise in the price of oil. Economic sentiment continued to be positive in the U.S., following an increase in manufacturing activity in December. Auto sales in the region also positive surprised participants in the market. On Wednesday, the U.S. FOMC released the minutes of their previous December 12-13 policy meeting. It came as a shock to investors, that the rate hike was no unanimous – with two committee members voting against the move, stating that the hike would slow prosperous economic growth and impede the acceleration of much needed inflation.

Canadian markets also opened up the New Year to new highs, with the TSX pushing further to start of 2018. Similarly to the American markets, gains were led mostly by energy stocks following increases in the price of oil. WTI oil spot prices reached $60 a barrel, a first since mid-2015. Short-term rises in natural gas prices assisted the rise in oil as the two are closely tied. The healthcare sector also assisted growth in the Canadian markets, after most licensed marijuana producers saw strong gains over the week. Employment in Canada saw a positive increase in December, with the country adding 79,000 jobs and unemployment in the region hitting 5.7% – its lowest level since 1976. The CAD/USD pair traded at around 1.25 for the week, up 0.10% from its previous week’s close. The loonie climbed 2.5% in December against the greenback, and is continuing its growth into earl 2018.

European markets started the year off a bit slower than others, with strong economic data in the region helping to create a rally later into the trading week. The FTSE 100 hit another record high, while the STOXX 600, DAX, and other key European indexes closed higher at the week’s end. Inside sources told new agencies that the European Central Bank (ECB) may end its bond-buying stimulus program if the Eurozone continues its strong growth. The main goal of the program was to help inflation rates in the region, but some countries are still struggling with weaker than normal inflation (i.e. Italian – 1.0% inflation). News of the potential ending, pushed bond yields in the region much higher. Markets in Japan opened on Thursday Jan. 4th, for the 2018 New Year. Japanese equities rallied 3.3%, leading the index to a 26-day high. Over the short two-day trading week, the Nikkei 225 advanced 4.2% (950 points) to close at 23,714. Many economists believe 2018 will be a very strong year for Japan, following strong exports in 2017 – which are expected to continue into 2018.

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