Weekly Market Update (March 5 – March 9, 2018)

March 14, 2018

American equity markets moved back into the green, after retreating the previous week. The NASDAQ performed the best out of US indices, setting new intraday highs on Friday. The S&P 500 closed up at 2,786 on Friday – a 3.54% gain for the week. Gains in the US market were led primarily by the tech, financials, industrials, and materials sectors. The Bureau of Labor Statistics released positive economic news this week, announcing that the US added more job in February than originally expected – in addition to a slowdown in the growth of hourly earnings. Slowing of the wage growth helped reduce the previous inflation worries in the markets. Investors still expect the Fed to gradually increase interest rates, regardless of the slightly decrease in earnings growth. President Trump finalized imposing tariffs on both aluminum and steel imports this past week, clarifying that Canada and Mexico would be exempt, contingent on the NAFTA agreement. The potential for a trade war heightened, causing worries in the markets – pushing back on the weekly gains. Futures markets also took a hit, as investor’s worries about the repercussions of the imposed tariffs. Long-term treasury yields closed higher, following the strong job report and lessened inflation worries.

Canadian equity markets moved modestly higher this week closing at 15,557 – a gain of 1.25% for the week. Markets recovered after US trade fears disappeared, following Trump’s announcement that Canada would be exempt from the tariffs imposed on aluminum and steel. Healthcare and tech stocks led the gains into the week, with industrials and materials recovering after trade worries subsided. The CAD recovered from a previous 5-week retreat, led primarily by Trump’s tariffs on decreasing oil prices. The Bank of Canada left interest rates unchanged as expected, continuing to express a conservative view on future monetary policy. Bank officials mentioned that there was no urgency in future rate hikes.

European markets ended the week higher, as the DAX 30 (Germany’s index) was the only one visibly affected by US’s tariffs. Germany is a heavy exporter of steel products, automobiles, and other machinery. Italy’s markets remained positive, following this past week’s political election. European Union officials announced a list of more than 100 products produced in the region that would be affected by the US tariffs – valued at around 2.8B Euros total. Shares in European steel and auto manufacturers closed lower this week, as many investors worried about the growth prospects of these companies. The ECB had a monetary policy meeting this past week, leaving rate unchanged during the March meeting. Central bank officials upgraded the Eurozone’s growth forecast from 2.3% to 2.4% for 2018, and reduced the regions inflation forecast from 1.5% to 1.4%. This shows that the EU is still in a struggle to maintain target levels of inflation. Japan’s equity market also closed higher this week, with the Nikkei 225 gaining 1.4%. The BoJ similarly had their policy meeting this week, voting to maintain their current interest rate policy. Currently, short-term rates are sitting at -0.1%, while longer-term rates are at 0%. Analysts believe Japan’s fiscal policy will remain untouched throughout 2018. Japan’s GDP grew faster than expected, reaching 1.6%, which is up from a 0.5% growth rate in Q4 2017.

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