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 December 10, 2021.

Equity Indices	Level	1 week	YTD	52-week
S&P/TSX Composite	20,891	1.2%	19.8%	18.7%
S&P 500	4,712	3.8%	25.5%	28.5%
NASDAQ	15,631	3.6%	21.3%	26.0%
Euro Stoxx 50	4,199	2.9%	18.2%	19.2%
Hang Seng	23,996	1.0%	-11.9%	-9.1%

Source: Bloomberg, RBC Wealth Management

• TSX closed down Friday afternoon trading. Health care, staples and tech the laggards with energy and communication services the leaders. TSX closed up 1.3% for a solid weekly gain after a big rally to start the week.

• US equities finished mostly higher and near best levels in what was very quiet Friday trading (after the morning's highly anticipated CPI report). Major averages notched big weekly gains after coming under some pressure in the two prior weeks. Gold finished up 0.5%. WTI crude settled up 1.0%, snapping a big six-week losing streak. Canadian dollar little changed against USD.

• Busy week ahead for global central banks. About twenty central banks are holding meetings this week as a significant crossroads for policymakers’ approaches. Policymakers will have to weigh the potential risks of the Omicron variant with the prospect of monetary tightening as the currently inflationary environment continues to weigh on the economy.

• Some of the notable decisions to watch this week are the U.S. Federal Reserve possibly accelerating its QE taper, the European Central Bank’s inflation outlook, the Bank of Japan’s supportive tilt, and the Bank of England’s economic growth outlook. These four are together responsible for monetary policy in almost half of the world economy, according to Bloomberg. About 16 other counterparts are also meeting this week including Switzerland, Norway, Mexico, and Russia.

 

Economy

Canada

• The Bank of Canada (BoC) held monetary policy steady this week, keeping the policy rate unchanged and maintaining the overall level of Government of Canada bond holdings. In a statement following its Dec. 8 meeting, the bank conveyed a positive tone on the macroeconomic front, emphasizing that GDP has progressed as expected and that the labour market has returned to pre-pandemic levels, while also recognizing that the omicron variant adds new uncertainty.

• November was a strong month for the Canadian labour market, with job gains of 154,000 far exceeding consensus forecasts of 37,500. Potential drivers behind the larger-than-expected gains included continued easing of public health restrictions in Ontario and Quebec as well as the conclusion of fiscal programs such as the Canadian Recovery Benefit.

• With the number of participants in the labour force effectively unchanged from October, November’s strong rise in employment caused the unemployment rate to drop 0.7 percentage points to 6.0%.

U.S. 

• Nonfarm payrolls added 210,000 workers in the latest November report, well below Bloomberg’s pre-release survey consensus of 550,000. Although meager, we do not believe the report will stop the Fed from announcing a faster pace of tapering at this week’s policy meeting. Despite November being the slowest month of job growth year to date, there were some positives in the report, as labor force participation edged higher and the unemployment rate fell to 4.2%.

• Senate leaders Chuck Schumer and Mitch McConnell have agreed on a novel plan to raise the country’s debt ceiling after the U.S. Treasury warned Congress of running into a cash shortfall by mid-December, which could potentially lead to payment defaults for upcoming Treasury maturities coming due.

Further Afield 

• The pound has continued to plummet so far this month. Worries that the omicron variant might mean the Bank of England will delay its decision to increase interest rates at its upcoming Dec. 16 policy meeting is one reason.

• Another is that UK Prime Minister Boris Johnson is embroiled in a scandal which threatens his political survival. According to RBC Capital Markets, the odds that he will still lead the Conservative Party at the 2024 elections have declined significantly below 50%, raising the spectre of political uncertainty.

• The People’s Bank of China announced it would cut the reserve requirement ratio (RRR) by 15 basis points (bps) effective Dec. 15. This cut will release liquidity of RMB 1.2 trillion. We expect the RRR reduction to have a marginal positive impact on economic growth; it should ease liquidity concerns and will release long-term and stable funds, which should have a higher multiplier effect on macro growth.

 

 

Notes About Companies in Model Portfolio 

• Apple (AAPL) Bloomberg reported that a federal appeals court on Friday granted Apple's request to halt a 9-Dec deadline to comply with a judge's directive that the company allow app developers to "steer" customers to external payment options with links and buttons.

• Costco Wholesale (COST) Shares traded higher 6.8% after Costco reported Q1 EPS of $2.98 above the Street high and FactSet's $2.62 on revenues also above the Street high as well. Traffic increased +6.8% worldwide while average ticket was up +7.7% worldwide during the quarter. E-commerce sales in the quarter ex-FX increased 13.3% y/y on top of last year’s >86% jump.

  • In terms of delayed container arrivals on the Pacific Coast, ~79% of import containers are late by an average of 51 days and management noted they ordered earlier to help offset the delays. Analysts came away encouraged by Costco's ability to navigate the current inflationary/supply environment and believe that some of the share gains they're current seeing should be sticky given strong demand trends, member growth, and square footage expansion.

 

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Shiuman