Below is a summary of some of the relevant news items from the Capital Markets and the Economy from the past week extracted from RBC Global Insights and FactSet Research.

 

Markets

Market scorecard as of close on Friday October 8, 2021.

Equity Indices	Level	1 week	YTD	52-week
S&P/TSX Composite	20,416	1.3%	17.1%	23.5%
S&P 500	4,391	0.8%	16.9%	27.4%
NASDAQ	14,580	0.1%	13.1%	27.7%
Euro Stoxx 50	4,073	0.9%	14.7%	25.1%
Hang Seng	24,838	1.1%	-8.8%	2.7%

Source: Bloomberg, RBC Wealth Management

• TSX ended virtually unchanged Friday, giving back early gains in fairly subdued trading ahead of the long holiday weekend. Energy the leader with health care and tech the laggards. Canadian equities rose 1.1% yesterday, powering TSX to a solid weekly gain.

• US equities finished lower Friday, though major indices posted good weekly gains after coming under pressure last week. Gold finished down 0.1%. WTI crude settled up 1.3% for a seventh straight week of gains. Canadian dollar higher vs USD after stronger Canadian employment report vs weaker print south of the border.

• In a news-filled week, U.S. stocks finally broke higher on Oct. 7 after five successive days of large swings with little net change. The catalyst appeared to be a stopgap measure to extend the federal debt ceiling through early December. However, markets are still below the all-time highs set on Sept. 2, and the 24 trading days since that time marks the longest stretch this year without a new high in the S&P 500 Index.

• September is often a month of consolidation and the “churning” action of the markets at month-end suggests a turning point as investors await the onset of Q3 2021 earnings season.

• Consensus expectations for earnings season have dimmed recently as supply chain issues, inflation, and COVID-19 continue to act as headwinds. Retail giant Costco Wholesale (COST) warned of higher costs, even as it benefited from a ramp-up in sales of bulk items.

 

Economy

Canada

• Canadians took advantage of the rising temperatures and easing public health restrictions to make up for the services spending they had been deprived of throughout most of the pandemic. This resulted in the accommodation and food services sector growing at a double-digit rate (12.5% m/m) for the second consecutive month.

• StatCan reported the Canadian economy gained 157K jobs in September, a massive beat of the +60K consensus. Unemployment rate moved lower to 6.9% from 7.1% in August, in line with estimates. Economists noted the strong report bolsters case for BoC to move ahead with another QE taper this month, with some noting increased risk of rate hikes sooner than current guidance for H2'22. Yesterday, BoC Governor Macklem reiterated view that inflationary pressures appear temporary, though supply side constraints have proven more persistent than expected.

U.S.

• The U.S. government’s debt ceiling appears to serve no practical purpose beyond functioning as, at best, a political football, and at worst, a pressure point of economic and market consternation, as was the case in 2011 and 2013, and has been recently.

• During past debt ceiling episodes in 2011 and 2013, the rise in Treasury bill yields was most pronounced in the week just prior to a potential default, falling sharply back to normal levels after eventual resolutions.

• US Nonfarm payrolls only increased 194K, well below the ~500K consensus. However, still does not seem as if market thinks it will impact policy given low bar to near-term Fed tapering. Senate voted on party lines to increase the debt limit by $480B, punting the issue to early December when another government funding measure will also be needed. Nothing particularly incremental on the social spending bill though reports have shifted from recent focus on a narrowing gap back to big philosophical differences between moderates and progressives. 

Further Afield

• Natural gas prices in Europe and the UK, which had gone up by more than 150% in the past two months, retreated after Russia suggested it would be open to stabilizing prices by increasing its supply to Europe.

• The Reserve Bank of New Zealand (RBNZ), on Wednesday, raised its official cash rate to 0.5%, joining South Korea and Norway as the earliest countries to raise rates in the pandemic era.

• OECD closing in on global corporate tax deal though US Congressional support still looks difficult. Global energy crunch continues to dominate the headlines. China ordered coal miners to boost output. US electric companies warning customers about winter price hikes.

 

Notes About Companies in Model Portfolio 

• Apple (AAPL) People with knowledge of the effort say that Apple wants to expand the current setup -- which allows people to use their iPhones to control music, get directions, and make calls in cars -- so that CarPlay can control a car's climate-control system, speedometer, and other functions. The Bloomberg article says that the technology, which Apple is in the early stages of developing, could end up being similar to how Apple has addressed health and hone technology, though Apple would need carmakers to play along, which it's not clear that they would.

• Canadian National Railway (CNR) CN announced that it has scheduled a Special Meeting in response to a requisition by CIFF Capital and TCI for 22-Mar-22. TCI and CN have mutually agreed to the date of the Special Meeting. CN believes proxy contest initiated by TCI is misguided, costly and not in the best interest of CN's shareholders or its other stakeholders.

• Microsoft (MSFT) Ally.io, an OKR (objectives and key results) company, will join the Microsoft Viva family as part of its employee experience platform (EXP) designed to help companies embrace the new digital work life.

 

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Regards,

Shiuman