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 4^th, 2022.

Equity Indices	Level	1 week	YTD
S&P/TSX Composite	19,450	-0.1%	-8.4%
S&P 500	3,771	-3.3%	-20.9%
NASDAQ	10,475	-5.6%	-33.0%
Euro Stoxx 50	3,688	2.1%	-14.2%
Hang Seng	16,161	8.7%	-30.9%

Source: Bloomberg, RBC Wealth Management

• TSX finished higher Friday after recovering from some midday weakness, but still ended below highs from the open. Most sectors higher, materials the outsized gainer amid a big jump in commodity prices with financial the other upside standout. Canadian equities logged a modest weekly decline (after two weeks of big gains for the TSX).

• US equities finished higher in Friday trading, with morning strength fading (some focus on big tech weakness and threat of gas halt to Germany) before stocks rallied in the later afternoon. Major indices nevertheless logged notable weekly declines after two weeks of good gains. WTI crude settled up 5.0%, moving back above ~$90/barrel.

 

Economy

Canada

• The October Labour Force Survey showed Canada added 108K jobs last month, smashing consensus estimates for a modest 7.5K increase. Follows a 21K gain in September that came after four straight monthly declines. October gain essentially recouped those losses with employment levels back near recent May peak. Unemployment rate held steady at 5.2% as job gains were roughly matched by a 110K increase in the labour force.

• The Canadian economy edged slightly higher in August, posting 0.1% m/m growth in GDP, topping its initial estimate that suggested no growth for the month.

• Deputy PM and Finance Minister Freeland delivered a mini-budget that included new measures to boost clean tech investment and offers targeted aid to fight inflation while showing fiscal restraint. The Government projected a $36.4B deficit for 2022-23 and Freeland forecasted a balanced budget by 2027, though Liberals to spend roughly half of windfall tax revenue.

  • Read more about the Fall Economic Statement here.

U.S.

• US nonfarm payrolls increased by 261K in October vs consensus for 200K and September's upwardly revised 315K pace (was up 263K). While headline payrolls result is the lowest monthly increase since December 2020, Fed has been looking for more concrete signs of the labor market softening in the wake of its hiking campaign, though continued strength also plays into Fed hopes for hitting the (narrowing) path to a soft landing.

Further Afield

• The European economy eked out 0.2% q/q growth in Q3, thanks to the final effects of the economic reopening. Investment in France, consumption in Germany, and tourism in Spain offset weakness in other sectors. Looking ahead, prospects for economic growth remain challenging, in our view.

• Yet inflation in the euro area is showing no sign of abating, soaring to 10.7% y/y in October, up from 9.9% in September and 0.4 percentage points above consensus expectations. Energy prices were the main culprit but rising input costs are increasingly being passed through to end users. Inflation is spreading to manufactured goods.

Notes About Companies in Model Portfolio

• A total of 85% of the S&P 500 companies are expected to have reported earnings by the end of the week, and if trends continue, overall earnings for the quarter will have grown by only 2% y/y. This growth rate likely overstates the actual health of earnings. If we exclude the outsized impact of the Energy sector, which accounts for only 5% of the S&P 500 by market capitalization, earnings growth would have turned negative at single-digit percentage rates.

• Aside from the well-telegraphed macro concerns, most companies’ reports also cited earnings headwinds from the strong U.S. dollar. The average value of the trade-weighted dollar was 16% higher in Q3 2022 compared to the same quarter last year. With almost half of S&P 500 revenues generated overseas, this implies single-digit declines in revenues from currency headwinds alone. Technology companies were particularly impacted.

• Apple (AAPL) COVID-19 restrictions have temporarily impacted the primary iPhone 14 Pro and iPhone 14 Pro Max assembly facility located in Zhengzhou, China. The facility is currently operating at significantly reduced capacity. Expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than previously anticipated and customers will experience longer wait times to receive their new products. Continue to see strong demand for iPhone 14 Pro and iPhone 14 Pro Max models.

• Berkshire Hathaway (BRK.A, BRK.B) announced operating results for the third quarter and first nine months of 2022 and 2021. Third-quarter reported revenue, which includes unrealized and realized gains/losses from Berkshire's investment portfolios, declined 15.9% to $63.5 billion from $75.5 billion in the prior-year period. Net loss for the first nine months of 2022 was $40.98 billion compared with $50.1 billion profit in 2021, with losses attributed to catastrophe losses tied to Hurricane Ian's impact and Berkshire’s investment portfolio.

• Johnson & Johnson (JNJ) and Abiomed (ABMD), a world leader in breakthrough heart, lung and kidney support technologies, today announced that they have entered into a definitive agreement under which Johnson & Johnson will acquire through a tender offer all outstanding shares of Abiomed, for an upfront payment of $380.00 per share in cash, corresponding to an enterprise value of approximately $16.6 billion which includes cash acquired. The transaction broadens Johnson & Johnson MedTech’s (JJMT) position as a growing cardiovascular innovator, advancing the standard of care in one of healthcare’s largest unmet need disease states: heart failure and recovery.

• Nutrien (NTR) record net earnings of $6.6 billion and adjusted EBITDA1of $10.1 billion in the first nine months of 2022. Management comment: “Nutrien has delivered record earnings in 2022 due to the strength of agriculture fundamentals, higher fertilizer prices and excellent Retail performance… the underlying demand drivers remain strong and global fertilizer supply challenges still persist, creating a supportive environment for Nutrien as we look ahead to 2023 and beyond.”

• TELUS Corporation (T) released its unaudited results for the third quarter of 2022. Consolidated operating revenues and other income increased by 10 per cent over the same period a year ago to $4.7 billion. Compared to the same period last year, consolidated EBITDA increased by 10 per cent to over $1.6 billion.

 

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Regards,

Shiuman