Weekly Market Update (January 08 – January 12, 2018)

January 15, 2018

American markets closed the second week of the New Year with another round of solid gains. The U.S’s largest index the S&P 500 closed down for the first time in 2018 on Wednesday, later rebounding following rises in a most of stock sectors. Investors are keeping their eye on the closely watched Q4 (annuals) earnings releases that started early this past week. This earnings season is estimated to be similar to the strength of the Q3’s, with the reporting companies already having seemingly positive results. All three major American indices the S&P 500, DJIA, and NASDAQ hit all-time highs once again. Worries from last week,   regarding China’s consideration into slowing its U.S Treasury purchases continued to drift early into the week. Yields on 10-year T-notes rose to 2.60%, the highest they’ve been in the past 10 months – following the lower bond prices across the curve. Worries later subsided and markets reverted, after China denied this allegation, saying it was purely speculation and untrue. Retail sales in December increased by 0.4% in December, a strong rise following a 0.9% gain in November’s sales, leading big-box retailers to see appreciations in their stock price.

Canadian markets ended the second week of 2018 lower, with the TSX closing down at 16,296. Energy stocks once again had a strong week, following large increases in the price of oil. WTI Oil prices climbed to around $62 a barrel later into the week, after a decrease in U.S oil inventories. The Canadian market ignored increases in commodity prices, as NAFTA concerns outweighed the gains. Speculation that the U.S would pull out of the NAFTA agreement very soon, once again surfaced – causing Canadian investors to worries about the potential downsides. Unlike the previous week, the Healthcare sector saw a dramatic drop in performance, with most large cannabis stocks releasing drops over the course of the week. NAFTA worries also superseded a positive December housing starts release, with housing starts beating estimates at 217k, although this is lower than Novembers 251k.

Similar to the American market, European markets closed the week off higher. One of Europe’s largest indices the STOXX 600, reached its highest point since August 2015. A weaker pound and strong U.K economic data boosted the FTSE to a new record high. The government bond sell off in the Eurozone continued, as worries continued that the ECB would stop its monetary stimulus program. This program consisted of the purchasing of government treasuries in most EU countries. The ECB confirmed late last year it would continue this stimulus package into 2018, but has already began slashing its purchases. The World Bank released a report estimating that the Japanese economy will grow 1.3% in 2018, after a strong 2017 – showing that the Japanese economy is showing strong growth potential. Cryptocurrencies also saw another volatile week, following the alleged all-out ban of crypto trading in South Korea. The South Korean government mentioned this was only one consideration, and not necessarily what would end up happening.

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