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 November 5, 2021.

Equity Indices	Level	1 week	YTD	52-week
S&P/TSX Composite	21,456	2.0%	23.1%	31.6%
S&P 500	4,698	2.0%	25.1%	33.8%
NASDAQ	15,972	3.1%	23.9%	34.3%
Euro Stoxx 50	4,363	2.6%	22.8%	35.7%
Hang Seng	24,871	-2.0%	-8.7%	-3.2%

Source: Bloomberg, RBC Wealth Management

• TSX ended higher Friday, closing at a new record high. Most sectors higher, energy and materials the leaders with health care the laggard. TSX notched solid 2% weekly gain, bouncing back from losses last week that snapped a streak of three weekly gains. Energy the best performer amid a strong move for crude that pushed WTI back firmly above $81/barrel.

• US equities finished higher. S&P 500 hung onto gains, higher for seventh consecutive session to post a fifth straight week of gains. Gold finished up 1.3%. WTI crude settled 3.1%, just off best levels but still lower for the week. Canadian dollar slightly higher against USD (80.3 cents U.S./CAD or C$1.25/USD).

• Earnings season, at least for large caps, is nearing its conclusion as companies constituting 82% of the S&P 500’s market capitalization have reported Q3 results. So far, the trend has been better than hoped for versus the start of the quarter, as earnings per share growth for the S&P 500 is on track for a 37.5% y/y improvement, up from a consensus expectation of 26.4% immediately before results began to be released.

• Reuters reported Manulife Financial MFC.CN became the Canada's first financial company to announce a dividend 5 cent dividend and a repurchase of 39M common shares a day after the Office of the Superintendent of Financial Institutions (OSFI) lifted restrictions on capital distributions. Recall OSFI made an announcement Thursday that clears the way for Canadian banks to hike dividends and resume buybacks. It confirmed that starting Friday, Canadian banks and insurers can again begin raising dividends and repurchasing shares.

 

Economy

Canada

• The Bank of Canada (BoC) has opened up a new chapter in post-pandemic monetary policy, announcing the end of quantitative easing and the beginning of the reinvestment phase. This does not mean that monetary accommodation is coming to an end. The reinvestment phase will simply maintain the level of stimulus in the financial system, but not increase it further.

• The October Labour Force Survey showed the Canadian economy gained 31K jobs last month, just shy of +50K consensus. This followed a September jobs report that saw a stronger than expected 157K gain and brought Canadian employment back to pre-pandemic levels.

• Unemployment rate improved to 6.7% in October, from 6.9% in prior month, better than 6.9% consensus. Gains were strongest in retail trade, offset by declines elsewhere, including accommodation and food services. Gains again mostly came from full-time work, with part-time also up modestly.

• Canada's merchandise exports decreased 2.3% in September while imports were down 3%. Statcan noted both declines were largely due to the shortage of semiconductor chips and their impact on the production of motor vehicles in NA. Exports of motor vehicles and parts fell 17.9% in September and are 40% lower y/y. Exports of passenger cars and light vehicles dropped 27.8% in September as the result of production stoppages.

• Total exports rose 5% in Q3, the fifth consecutive quarterly increase led by higher exports of energy products. Exports of forestry and building products fell 13.8% partially offsetting the rise in Q3 due to lower prices. Imports rose 3.2% in Q3, also a fifth quarterly increase. Q3 trade surplus widened to $4B, the largest surplus since 2008.

U.S. 

• The broad strokes of the Fed’s asset purchase tapering plans are as we expected: its $120 billion per month in asset purchases will be cut by $15 billion per month, starting this month, a pace that would bring bond buying to an end by June of next year.

• We believe “maximum employment” is the key issue for the Fed and will determine the outlook for rates; it also relates to issues around inflation. Put simply, the Fed is looking for inflation, but the right kind of inflation—and that is stable inflation around two percent that is being fueled by an economy and labor market operating at full capacity—broadly speaking that’s not what we have today, but when we will is the million dollar question.

Further Afield 

• On Thursday, the Bank of England (BoE) surprised markets with its decision to leave the policy rate unchanged at 0.10%, despite appearing to signal that a rate hike was upcoming, having previously indicated that one may be necessary to return inflation to its 2% target. The decision was a result of the committees growing concerns about the near-term outlook for the economy and uncertainty over the strength of the labour market following the termination of the federal government’s furlough scheme.

The Bank of England (BoE) surprised markets by keeping the UK base rate on hold at a historic low of 0.1%. By keeping rates on hold, the BoE encouraged markets to reconsider their aggressive expectations.

 

We expect China’s macroeconomic policy to turn moderately growth-supportive, given the downward pressure on the economy. We think China could provide fiscal policy support by using the remaining quota of government bond issuance and slightly increasing fiscal spending.

 

Notes About Companies in Model Portfolio 

• TC Energy Corporation (TRP) announced net income attributable to common shares for third quarter 2021 of $779 million or $0.80 per share compared to net income of $904 million or $0.96 per share for the same period in 2020. Comparable earnings for third quarter 2021 were $1.0 billion or $0.99 per common share compared to $893 million or $0.95 per common share in 2020. TC Energy's Board of Directors also declared a quarterly dividend of $0.87 per common share for the quarter ending December 31, 2021, equivalent to $3.48 per common share on an annualized basis.

• Magna (MG) Announced Third Quarter 2021 Results on Friday. Sales decreased 13% to $7.9 billion, reflecting a global light vehicle production decrease of 12%, including decreases of 20% in Europe, 19% in North America and 12% in China. Results negatively impacted by lower light vehicle production substantially due to continued industry semiconductor chip shortages, production inefficiencies driven by unpredictable OEM production schedules, increased production and commodity costs and a provision on engineering service contracts.

• TELUS Corporation (T) Friday released its unaudited results for the third quarter of 2021. Consolidated operating revenues and other income increased by 6.8 per cent over the same period a year ago to $4.3 billion. Earnings before interest, income taxes, depreciation and amortization (EBITDA) increased by 7.6 per cent to $1.5 billion while Adjusted EBITDA increased by 7.1 per cent to $1.6 billion.

  • RBC Capital Markets –We believe Q3/21 results re-affirm an attractive multi-year set-up for the stock with a sector recovery and market share gains in the near term giving way to completed FTTH build/migration, copper de-commissioning at scale, and sustained FCF acceleration alongside potential crystallization of TELUS Health and TELUS Agriculture.

 

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Regards,

Shiuman