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 March 4, 2022.

Equity Indices	Level	1 week	YTD	52-week
S&P/TSX Composite	21,402	1.4%	0.9%	16.4%
S&P 500	4,329	-1.3%	-9.2%	12.7%
NASDAQ	13,313	-2.8%	-14.9%	3.0%
Euro Stoxx 50	3,556	-10.4%	-17.3%	7.8%
Hang Seng	21,905	-3.8%	-6.4%	-26.2%

Source: Bloomberg, RBC Wealth Management

• TSX finished higher Friday, near best levels. Sectors mixed, energy and materials the leaders with technology, health care and consumer discretionary the laggards. Canadian equities posted a solid weekly gain with the TSX back in positive territory on the year (boosted by heavy resource-sector weightings).

• US equities finished lower in Friday trading, though off worst levels after a late afternoon rally, while major averages all posted weekly losses. Gold finished up 1.6%. WTI crude finished up 7.4% Friday and up over 25% for the week. Canadian dollar lower against USD.

• Geopolitics still the big overhang on global risk sentiment. Russian forces seized the Zaporizhzhia nuclear power plant in Ukraine, where a fire broke out earlier Thursday from shelling. Putin said the operation is going according to plan and there seemed to be more doubt that he is looking for an off ramp despite losing the information war and the severity of Western sanctions. Reports continue to highlight the accompanying rally in commodities, supply chain pressures and corporate exodus from Russia. Report noted White House considering Russian energy ban.

 

Russia’s invasion of Ukraine 

• Eric Lascelles, RBC Global Asset Management’s chief economist, estimates the conflict could drive U.S. inflation measured by the Consumer Price Index to 8.5 percent, up from the 7.5 percent previously penciled in.

• Europe is particularly vulnerable to these disruptions because it imports close to 40 percent of its natural gas and 25 percent of its oil from Russia, though the level of dependence varies from country to country.

• According to Reuters, the International Monetary Fund stated over the weekend that it expected to bring Ukraine’s request for US $1.4 billion in emergency financing to its board for approval by next week. The lender added that “the ongoing war and associated sanctions will also have a severe impact on the global economy.”

• IMF also cited that the current rising energy and grain prices were creating an adverse shock to inflation and economic activity “at a time when price pressures were already high.”

 

Economy

Canada

• After being anchored at the lower bound since March 2020, and despite heightened geopolitical tensions, the Bank of Canada (BoC) has followed through with a 25 basis point hike to its policy rate.

• Bank of Canada (BoC) Governor said Inflation remains too high at around 5%. He added the invasion of Ukraine is pushing up prices for both energy and food-related commodities and a major source of uncertainty. The Governor said rates are on a higher interest rate path with the Canadian economy fit to handle them with the intent to return inflation to the 2% target.

• It has taken nearly two years, but real GDP in Canada has returned to pre-pandemic levels. Economic growth finished on a strong note in 2021, expanding 1.6% in Q4, bringing total GDP growth for the year to 4.6%, according to Statistics Canada.

U.S.

• The weekly initial unemployment claims report showed that the U.S. economy saw fewer filings than expected with the announced 215,000 coming in below the consensus estimate of 229,000. Unemployment rate slipped to 3.8% vs the 3.9% expected.

• Manufacturing activity was also stronger than anticipated with this week’s release of February’s ISM Manufacturing Purchasing Managers’ Index data registering 58.6, higher than expectations at 58.0 and indicative of an ongoing economic expansion.

Further Afield

• There is now a clear divergence in central bank policy, with the European Central Bank likely to delay raising interest rates, whereas the market expects the Bank of England (BoE) to raise interest rates by 0.25% this month, albeit with some notable caution.

• Hong Kong’s Purchasing Managers’ Index (PMI) plunged to 42.9, the lowest level since April 2020. New orders and output also hit their lowest points since April 2020. The PMI signals a worsening in the economy as new COVID-19 cases surge and Hong Kong braces for a citywide lockdown, likely during compulsory testing of the entire population in March.

 

Notes About Companies in Model Portfolio

• Costco Wholesale Corporation (COST) today announced its operating results for the second quarter (twelve weeks) and the first 24 weeks of fiscal 2022, ended February 13, 2022. Net sales for the quarter increased 16.1 percent, to $50.94 billion, from $43.89 billion last year. Net income for the quarter was $1,299 million, $2.92 per diluted share. Last year’s second quarter net income was $951 million, $2.14 per diluted share, which included $246 million pretax, $0.41 per diluted share, in costs incurred primarily from COVID-19 premium wages. Net income for the first 24 weeks was $2.62 billion, or $5.90 per diluted share, compared to $2.12 billion, $4.76 per diluted share, last year.

• TD Bank Group (TD) today on Thursday its financial results for the first quarter ended January 31, 2022. Reported earnings were $3.7 billion, up 14% compared with the first quarter last year, and adjusted earnings were $3.8 billion, up 13%. TD wrapped up a strong earnings season for Canadian banks, with the six big banks beating Q1 estimates while keeping dividends unchanged, as expected.

 

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