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 April 8 2022.

Equity Indices	Level	1 week	YTD	52-week
S&P/TSX Composite	21,874	-0.4%	3.1%	13.8%
S&P 500	4,488	-1.3%	-5.8%	8.7%
NASDAQ	13,711	-3.9%	-12.4%	-1.4%
Euro Stoxx 50	3,858	-1.5%	-10.2%	12.0%
Hang Seng	21,872	-0.8%	-6.5%	-22.5%

Source: Bloomberg, RBC Wealth Management

• TSX closed higher in Friday afternoon trading, reversing some earlier weakness at the start of the session. Most sectors higher, energy, materials and, real estate the leaders with tech and industrials the laggards. TSX ended 0.4% lower in weekly trading, and up over 3% on the year. WTI crude ended up 2.1% in choppy trading, though still finished lower for second-straight week at $97.90 U.S. per barrel. Canadian dollar slightly higher against USD ($1.00 U.S. = $0.796).

• Major US equity indexes ended mostly lower Friday, though equal-weight S&P gained and sectors were mixed. Very quiet session with market devoid of directional drivers heading into the weekend. Next high-profile catalysts include March CPI and start of Q1 earnings season.

• U.S. Treasuries suffered another big weekly pullback with 10-year yields up over 30 bp, pushing through the 2.70% level.

• The S&P/TSX Composite Index advanced nearly 4% in the first quarter of 2022, outperforming the S&P 500 Index by more than 900 basis points (9%) in Canadian dollar terms. The variance was driven by the S&P/TSX Composite’s higher exposure to the Energy and Materials sectors, which gained approximately 29% and 20%, respectively, and account for roughly 30% of the index on an aggregate basis.

 

Canada’s Federal Budget

• The Honourable Chrystia Freeland has presented the 2022 Federal Budget in the House of Commons last Thursday. For details of the key changes, please refer to the 2022 Federal Budget article.

Here are some highlights:

• Tax-Free First Home Savings Account (FHSA) – to help individuals save for their first home. Contributions to an FHSA will be deductible and income earned in an FHSA will not be subject to tax. Qualifying withdrawals from an FHSA made to purchase a first home will be non-taxable.

• Residential property flipping rule – Profits arising from dispositions of residential property (including a rental property) that was owned for less than 12 months will be deemed to be business income; they are not eligible for the 50 percent capital gains inclusion rate or the Principal Residence Exemption.

• Small business deduction – The budget proposes to extend the taxable capital range to increase the amount of combined taxable capital employed in Canada of the CCPC and its associated corporations before a grind-down to the business limit occurs. The new range would be $10 million and fully eliminated at $50 million.

 

Economy

Canada

• The Bank of Canada’s (BoC) Business Outlook Survey (BOS) for Q1 2022 reaffirmed growing expectations that the central bank will announce a 0.5% interest rate hike at its April 13 meeting.

• The results of the survey paint a picture of a dampening economy, with a record number of firms reporting capacity pressures related to either labor or supply chain issues, and about half expecting sales growth to slow over the next 12 months.

U.S.

• The weekly initial unemployment claims report showed the economy saw fewer filings than expected with the announced 166,000 coming in well below consensus estimates of 200,000 and marking the lowest level since 1968. Services sector activity was also slightly stronger than anticipated with this week’s release of March’s ISM Non-Manufacturing Purchasing Managers’ Index data registering 58.3, higher than expectations at 58.2 and indicative of an ongoing economic expansion.

Further Afield

• The CAC 40 French benchmark index underperformed during the week as the market priced in increased political uncertainty and risk following a French presidential election poll pointing to a tight contest between President Emmanuel Macron and far-right populist challenger Marine Le Pen, ahead of the first-round vote this Sunday (April 10).

• European Central Bank March meeting minutes, released on Thursday, showed a division, as “some of the voting members preferred to set a firm end date for the asset purchase programme (APP) purchases during the summer”, while others preferred a “wait and see approach”.

• China has doubled down on its zero-tolerance approach to curbing COVID-19 infections, and we don’t expect it to change any time soon.

 

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I appreciate the opportunity to serve you and look forward to continuing to help you accomplish your long-term financial goals.

 

Regards,

Shiuman