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 7, 2022.

Equity Indices	Level	1 week	YTD
S&P/TSX Composite	18,583	0.8%	-12.4%
S&P 500	3,640	1.5%	-23.6%
NASDAQ	10,652	0.7%	-31.9%
Euro Stoxx 50	3,375	1.7%	-21.5%
Hang Seng	17,740	3.0%	-24.2%

Source: Bloomberg, RBC Wealth Management

• TSX ended sharply lower in Friday afternoon trading, near worst levels. Most sectors down, health care, tech, materials, consumer discretionary, industrials, real estate and financial the outsized decliners with energy the lone gainer. WTI crude settled up 4.7% and back above $90/barrel. Oil having its best week since March. Canadian dollar slightly higher against USD holding on to a 0.3% weekly gain.

• US equities finished lower in a Friday session that was largely uneventful after the premarket release of the September jobs report. Major indices held onto WTD gains built up during the big Monday-Tuesday rally.

• This week will likely prove pivotal in terms of Q4 market performance for stocks. On Thursday, Oct. 13, Q3 earnings season will begin in earnest with large-cap banks and asset managers reporting results. Consensus expectations are for S&P 500 earnings growth of 2.2% y/y, down from 9.5% at the end of Q2.

 

Economy

Canada

• The September Labour Force Survey showed Canada added 21K jobs last month, slightly below consensus for a 25K gain. Follows three straight monthly declines that saw the economy shed more than 100K jobs over that span. Unemployment rate ticked down to 5.2% (after rising 0.5 ppts to 5.4% in August) as fewer people searched for work.

• The Canadian economy narrowly avoided the contraction the consensus had been expecting, with GDP growing a modest 0.1% for the month. The growth was largely driven by improved crop production in the agricultural sector and strong improvement in oil sands output that had been constrained by maintenance activities earlier in the year.

U.S.

• Nonfarm payrolls increased 263K in September, a bit more than expected, following unrevised 315K gain in August. Unemployment rate unexpectedly ticked down 0.2pp to 3.5%. Market was hoping for a weaker report to fit with some of this week's earlier hints about some loosening in the labor market.

• September’s Institute for Supply Management (ISM) economic activity data showed a slight slowing compared to August levels, but were still representative of an expansionary manufacturing sector.

• Retail sales fell to their lowest levels since 2021 and spending on accommodation and food services contracted for the first time since January. While the Bank of Canada will likely be pleased to see interest rates having their desired effect, RBC Economics expects the central bank to raise rates another 75 basis points before the end of the year.

Further Afield

• The secret is out. Bank of England (BoE) Deputy Governor Sir Jon Cunliffe has confirmed what many market participants thought, stating in a letter this week that the meltdown in gilt markets that led to central bank intervention started on the day Chancellor Kwasi Kwarteng announced the “mini-budget.”

• Hong Kong replaced its mandatory hotel quarantine for inbound travelers with three-day home surveillance staring Sept. 26. However, data show that it may take some time for the number of travelers to recover to pre-pandemic levels. According to Bloomberg, the number of available seats and flights in October is only about 18% of what it was in October 2019. Cathay Pacific, Hong Kong’s flagship airline, said it is challenging to bring back flight crews as many of them left the industry during the pandemic. It also takes time for Cathay Pacific to recruit and train new staff.

 

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