Category: Uncategorized

• China’s National Bureau of Statistics on Monday said the country’s second-quarter GDP rose by 4.7%.
• That’s slower than the 5.3% year on year GDP increase in the first quarter.
• Retail sales for June missed expectations, while industrial production figures beat.
  
• China reports second-quarter GDP growth of 4.7%, missing expectations (cnbc.com)

Monday July 15

China’s Third Plenum policy meeting runs through Thursday

China real GDP for the second quarter, plus June industrial production, retail sales and fixed asset investment

Euro area industrial production

830 am ET: Canada manufacturing sales

830 am ET: Canada wholesale trade

830 am ET: Canada new motor vehicle sales

1030 am ET: Bank of Canada Business Outlook Survey and Survey of Consumer Expectations (Q2)

1230 pm ET: Fed Chair Powell interviewed at the Economic Club of Washington, DC

Earnings include: BlackRock, Corus Entertainment, Goldman Sachs Group, Prairiesky Royalty

Tuesday July 16

Euro area trade surplus for May, plus Germany business confidence survey and Italy CPI for June

815 am ET: Canada housing starts for June. They are expected to be down 1.7%

830 am ET: Canada consumer price index for June. Consensus is for a 0.1% rise from May. Year over year it is expected to be up 2.8%, cooling from 2.9% a month earlier

830 am ET: U.S. retail sales for June. Consensus is for a decline of 0.2%

830 am ET: U.S. import prices

10 am ET: U.S. NAHB housing market index for July

10 am ET: U.S. business inventories.

Earnings include: Bank of America, Charles Schwab, Morgan Stanley, Goodfood Market

Wednesday July 17

Japan trade balance

ECB Monetary Policy Meeting; press conference at 845 am ET

UK June employment report

830 am ET: Canada international securities inflows and outflows

830 am ET: U.S. housing starts for June. Consensus is for a 1.3 million annualized rate, which is up 1.8%

830 am ET: U.S. building permits

915 am ET: U.S. industrial production. Consensus is for a rise of 0.4%

2pm ET: U.S. Beige Book

Earnings include: Alcoa, US Bancorp, Las Vegas Sands, Johnson & Johnson

Thursday July 18

Japan consumer prices

UK consumer confidence and June retail sales

830 am ET: Canadian construction investment

830 am ET: U.S. initial jobless claims

10 am ET: U.S. leading indicator

Earnings include: Alaska Air Group, American Airlines, Blackstone, Taiwan Semiconductor Manufacturing, Domino’s Pizza, D R Horton, Netflix, Choice Properties REIT

Friday July 19

830 am ET: Canadian retail sales for May. Consensus is for a 0.2% decline. In April, they rose 0.7%

830 am ET: Canadian industrial and raw materials price index

830 am ET: Canada household credit and mortgage credit for May

Earnings include: Travelers, Halliburton

Federal Reserve Chair Jerome Powell’s testimony and U.S. inflation data top the agenda in the week to come, with U.S. banks reporting earnings and rate decisions due in New Zealand and South Korea.

Meanwhile, the tectonic plates of politics continue shifting, with France’s Sunday election following hot on the heels of the U.K. vote.

Here is your look at what matters for markets in the coming week from Makhaila Gause and Lewis Krauskopf in New York, Kevin Buckland in Tokyo, Yoruk Bahceli in Amsterdam and Marc Jones in London.

1. Inflation update

Thursday’s monthly U.S. consumer price index reading will shape views on whether the Fed could cut interest rates in the coming months.

The June reading is expected to have climbed 0.1 per cent, according to a Reuters poll, after being unexpectedly unchanged in May.

Data late last month showed another inflation measure, the personal consumption expenditures price index, rose 2.6 per cent on an annual basis – suggesting inflation is cooling, but the measure was above the Fed’s target of 2 per cent.

That comes of course after Powell’s testimony before Congress on Tuesday. He told a conference in Portugal this week that the U.S. is back on a “disinflationary path,” but policymakers need more data before cutting interest rates.

2. Bank earnings

Higher interest rates and an uncertain economic environment are casting a cloud over U.S. bank earnings, with the second-quarter reporting season kicking off.

JPMorgan Chase, Citigroup and Wells Fargo will report second-quarter earnings on July 12. Bank of America will release its results on July 16.

The largest U.S. lender, JPMorgan, is expected to report earnings per share (EPS) of $4.69, according to LSEG estimates – below $4.75 a year earlier. Bank of America’s EPS is forecast to slide to 79 cents from 88 cents a year earlier, though EPS at Citi and Wells Fargo are projected to climb.

Executives’ commentary on the path of interest rates will remain a key focus, especially after industry leaders cited improving conditions for investment banking, analysts said.

3. Take two

France is back to the polls on Sunday for the second round of its shock snap election. Investors are pinning their hopes on a hung parliament.

Prospects for higher spending under Marine Le Pen’s far-right National Rally (RN), or even a left government, rocked markets in June.

But investors are more optimistic this week, with the RN posting a smaller win than some polls expected at last Sunday’s first round. A cross-party bid to keep it away from power this week has further reduced the odds of an RN absolute majority.

The risk premium on France’s debt over Germany’s has dropped to around 70 basis points, after hitting its highest since 2012 last week at 85 bps.

But a hung parliament is no comfort for investors, as it risks a policy paralysis that could make it even harder to improve France’s stretched finances that have left it facing European Union’s disciplinary measures.

4. Pondering policy pivots

Investors are hungry for clues on whether rate cuts are coming this year at the Reserve Bank of New Zealand and the Bank of Korea. Both central banks have taken a cautious stance amid stubbornly high inflation, and are widely expected to keep rates steady at 15-year highs at their meetings on Wednesday and Thursday, respectively In New Zealand in particular, policymakers even flagged the risk of another hike this year, with a cut not projected until late 2025.

Markets are more optimistic, pricing for a single cut this year to come as early as October, as inflation cools, business sentiment deteriorates and domestic demand weakens.

South Korea has had even more pronounced indications of prices coming under control, but the market consensus is still for no cut until the fourth quarter. Political pressure is mounting though, with President Yoon Suk Yeol calling cuts to keep in step with the U.S. Federal Reserve “unavoidable.”

5. Baptism of sewage

New governments face a baptism of fire, but for the UK’s just-crowned Labour Party, it will be more of a baptism of sewage on Thursday.

That’s when water regulator, OFWAT, announces just how much water firms – most of whom have been relentlessly pumping untreated human effluent into U.K. rivers for years – can jack up customers’ bills. It has the potential to turn nasty.

Britain’s biggest water company, Thames Water, which serves more than 16 million customers in and around London and has 15 billion pounds ($19.14-billion) of debt, faces nationalization unless it can attract vast amounts of new capital to fix its woes.

It has requested bill hikes of 59 per cent, which OFWAT is unlikely to grant given the public mood. But it will need to be enough to convince reluctant investors, who have already started to bail out of Thames, to turn the taps on again.

Monday July 8

3 pm ET: U.S. consumer credit

Tuesday July 9

6 am ET: U.S. NFIB small business economic trends survey

10 am ET: U.S. Fed Chair Powell testifies to the Senate Banking Committee

Wednesday July 10

Chinese June consumer prices and producer prices

Italy industrial production

10 am ET: U.S. Fed Chair Powell testifies to the House Financial Services Committee.

10 am ET: U.S. wholesale inventories for May.

Earnings include: Goodfood Market, Postmedia Network

Thursday July 11

China trade surplus.

Germany June inflation; UK GDP, industrial production, trade deficit and services index.

830 am ET: U.S. consumer prices for June. Consensus is for a 0.1% rise from May, or 3.1% year over year, which is down from May’s reading of 3.3%. Excluding food and energy, inflation is expected to be up 3.4%.

830 am ET: U.S. initial jobless claims.

2 pm ET: U.S. budget balance.

Earnings include: MTY Food Group Inc, Cogeco and Cogeco Communications, OrganiGram Holdings Inc, Richelieu Hardware Ltd,

Friday July 12

Japan industrial production

Germany retail sales for May and France inflation data for June

830 am ET: Canadian building permits for May. It’s expected to be down 5% after a 20.5% surge in April.

830 am ET: U.S. producer price index.

9 am ET: Canada existing home sales for June. They are expected to be down 8.5% from a year earlier, while average prices are expected to be down 3%.

9 am ET: MLS home price index for June. It’s expected to be down 4% from a year ago, steeper than May’s decline of 2.4%.

10 am ET: University of Michigan consumer sentiment. Consensus is for a reading of 67.0, down from June’s 68.2.

Earnings include: Wells Fargo, JP Morgan Chase & Co., Citigroup

Published: 7/5/2024 5:42 PM ET | 

The Canadian market snapped a three-day winning streak and ended weak on Friday, weighed down by losses in energy sector after oil prices drifted lower. Investors digested the jobs data from the U.S. and Canada, and assessed the outlook for interest rates.

The benchmark S&P/TSX Composite Index ended down 184.99 points or 0.83% at 22,059.03, the day’s low. The index gained about 0.85% in the week.

The Energy Capped Index fell 2.43%. Kelt Exploration (KEL.TO) dropped 5.55%. Parex Resources (PXT.TO), Suncor Energy (SU.TO), Veren (VRN.TO), Vermilion Energy (VET.TO), International Petroleum Corp (IPCO.TO), Cenovus Energy (CVE.TO), Imperial Oil (IMO.TO), MEG Energy (MEG.TO) and Precision Drilling Corp (PD.TO) ended down 2.5 to 4%.

In the financials sector, Power Corporation of Canada (POW.TO), Goeasy (GSY.TO), Brookfield Asset Management (BAM.TO), Laurentian Bank (LB.TO), Bank of Montreal (BMO.TO), Onex Corp (ONEX.TO), Fairfax Financial Holdings (FFH.TO), CDN Western Bank (CWB.TO), Sun Life Financial (SLF.TO) and Manulife Financial (MFC.TO) lost 1 to 2.5%.

Utilities and industrials shares were among the other major losers in the session. Several stocks from real estate and consumer discretionary sectors also closed weak.

Among the gainers, Hut 8 Corp (HUT.TO) soared 11%. Aritzia Inc (ATZ.TO) gained about 3%. Newmont Corporation (NGT.TO) climbed 2.5%. Wheaton Precious Metals (WPM.TO), Agnico Eagle Mines (AEM.TO) and Franco-Nevada Corporation (FNV.TO) also ended notably higher.

Data from Statistics Canada showed employment in Canada fell by a marginal 1,400 in June, following a 26,700 increase in the previous month. The unemployment rate rose to 6.4% in June from 6.2% in the earlier month.

The Ivey Business School said that its Purchasing Managers Index in Canada surged to 62.5 in June 2024 from 52 in the previous month, significantly surpassing market forecasts of 53. This marks the eleventh consecutive month of economic growth, the second highest in the current sequence.

In U.S., the Labor Department said non-farm payroll employment shot up by 206,000 jobs in June compared to economist estimates for an increase of about 190,000 jobs. The report also showed the increases in employment in April and May were downwardly revised to 108,000 jobs and 218,000 jobs, respectively, reflecting a net downward revision of 111,000 jobs.

The unemployment rate also rose for the third straight month, inching up to 4.1% in June from 4% in May. Economists had expected the unemployment rate to remain unchanged. With the unexpected uptick, the unemployment rate reached its highest level since hitting a matching rate in November 2021.

Oil prices were subdued on Friday but headed for a fourth straight weekly gain due to West Asia tensions, weather concerns and hopes of rising demand during the Northern Hemisphere’s summer driving season.

Benchmark Brent crude futures slipped 0.2 percent to $87.26 a barrel, while WTI crude futures were little changed at 83.86.

Crude oil prices were up nearly 3 percent for the week as investors weighed the outlook for summer demand.

Recently, the American Automobile Association forecast 5.2 percent increase in trips during U.S. Independence Day holiday, with car travel up 4.8 percent from last year.

Additionally, recent data by the U.S. EIA (Energy Information Administration) showed U.S. crude inventories shrank by the most in almost a year.

On the geopolitical front, Lebanon’s Hezbollah said it has launched more than 200 rockets and drones targeting Israeli military positions in response to a strike that killed a senior commander of the armed group.

It is feared that further escalation in tensions would lead to supply disruptions from the region.

U.S. job growth slowed to a still-healthy pace in June, with the unemployment rate rising to 4.1 per cent, increasing the chances that the Federal Reserve will be able to tame inflation without tipping the economy into recession.

Nonfarm payrolls increased by 206,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said in its closely watched employment report on Friday. Data for May was revised sharply down to show 218,000 jobs added instead of the previously reported 272,000.

Average hourly earnings rose 0.3 per cent after advancing 0.4 per cent in May. In the 12 months through June, wages increased 3.9 per cent. That was the smallest gain in wages since June 2021 and followed a 4.1 per cent rise in May. Wage growth in a 3 per cent-3.5 per cent range is seen as consistent with the Fed’s 2 per cent inflation target.

The unemployment rate rose to 4.1 per cent from 4.0 per cent in May.

When added to the moderation in prices in May, the report confirmed that the disinflationary trend was back on track after inflation surged in the first quarter. It also could boost Fed policy-makers’ confidence in the inflation outlook and push the U.S. central bank a step closer to start cutting rates later this year.

The Fed has maintained its benchmark overnight interest rate in the current 5.25 per cent-5.50 per cent range since last July. The minutes of the central bank’s June 11-12 meeting, which were published on Wednesday, showed policy-makers acknowledged the economy appeared to be slowing and that “price pressures were diminishing.”

The U.S. central bank has hiked its policy rate by 525 basis points since 2022 to curb inflation. Financial markets remain optimistic the Fed could start its easing cycle in September.

The Canadian economy lost 1,400 jobs in June as the unemployment rate climbed to its highest level in more than two years, Statistics Canada said Friday.

In its monthly labour force survey report, the agency said the unemployment rate came in at 6.4 per cent for the month, up from 6.2 per cent in May, as the size of the labour force grew.

The June result was the highest reading for the unemployment rate since January 2022 when it was 6.5 per cent.

Statistics Canada noted the unemployment rate has trended up since April 2023, rising 1.3 percentage points over that period.

It also said that as the unemployment rate has increased, so has the proportion of long-term unemployed with 17.6 per cent of those unemployed in June having been continuously jobless for 27 weeks or more, up four percentage points from a year earlier.

The overall loss in the number of jobs in June came as the economy lost 3,400 full-time positions, offset in part by a gain of 1,900 part-time jobs.

Statistics Canada said the number of people working in transportation and warehousing fell by 11,700, while those in public administration dropped by 8,800.

The accommodation and food services sector added 17,200 jobs and the number of those working in agriculture grew by 12,300.

The jobs report is a key data point ahead of the next Bank of Canada interest rate decision set for July 24.

The central bank cut its key interest rate last month for the first time since the early days of the pandemic. The bank’s policy interest rate stands at 4.75 per cent.

First-time applications for U.S. unemployment benefits drifted lower last week, which could allay fears of a material shift in the labour market.

Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 233,000 for the week ended June 22, the Labor Department said on Thursday. The claims data included last Wednesday’s Juneteenth National Independence Day, a new holiday. Claims tend to be volatile around public holidays.

They had risen to the upper end of their 194,000-243,000 range of this year.

Economists are split on whether the recent increase in claims pointed to rising layoffs or the repeat of volatility experienced during the same time last year.

Claims remain at historically low levels and are being closely watched for signs whether employers are laying off more people as the economy slows in response to the 525 basis points worth of interest rate hikes delivered by the Federal Reserve since 2022 to tame inflation.

The government confirmed in a separate report on Thursday that economic growth moderated sharply in the first quarter.

Gross domestic product increased at a slightly upwardly revised 1.4 per cent annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said in its third estimate of GDP for the January-March quarter.

Growth was previously estimated at a 1.3 per cent pace. The economy grew at a 3.4 per cent rate in the fourth quarter.

The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25 per cent-5.50 per cent range since last July.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 18,000 to a seasonally adjusted 1.839 million during the week ending June 15, the claims report showed. The so-called continuing claims data covered the period during which the government surveyed households for June’s unemployment rate.

The jobless rate rose to 4.0 per cent in May for the first time since January 2022. Most economists, however, did not view the rate at the current level as posing a danger to the labour market, arguing that the increase was concentrated among the 35-44 age group, recent immigrants and certain industries.

“Though job growth will slow, it will remain sufficient to limit a significant and broad-based increase in the unemployment rate,” said Ryan Sweet, chief economist at Oxford Economics.