Weekly Commentary – Ending 01/13/2012

The week ending January 13th, saw generally higher markets around the globe as investors took the S&P downgrade of most Eurozone nations debt in stride.

The S&P/TSX Composite Index gained 0.3% with five of ten sectors ending the week with positive returns. Stronger exports of energy and automobiles helped a trade surplus of $1.1billion in November, compared to a revised trade deficit of $487 million in October. The New Housing Price Index rose in November by 0.3% month-on-month, following a gain of 0.2% in October. Building permits declined by 3.6% month-on-month in November, following a revised gain of 11.6% in Octobers. The decline was due to a fall in non-residential work.

U.S. equities gained for the week, despite mixed economic data. The S&P 500 Index, Dow Jones Index and the Nasdaq gained 0.9%, 0.5% and 1.4% respectively. The U.S. trade deficit widened to $47.8 billion (US) in November, from $43.3 billion (US) in October, which was due to an increase in imports of oil and automobiles. Initial jobless claims for the week ended January 7th increased by 24,000, to 399,000, indicating that an increase in temporary labour during the holidays may have boosted December figures. Lastly, retail sales rose by 0.1% month-on-month in December, slower than anticipated and the 0.4% gain reported in November.

Despite the S&P downgrade of most Eurozone nations, European markets finished positive for the week. The German DAX gained 1.4%, France’s CAC gained by 1.9% and the U.K.’s FTSE declined 0.2%. The week was characterized by various successful bond auctions by nations such as Italy and Spain. The European Central Bank (ECB) left its key interest rate unchanged, at 1.0%, which should help to provide further stimulus to the economy. Eurozone industrial production fell by 0.1% month-on-month in November and was down 0.3% year-on-year. It was attributed to a contraction in both durable and non-durable consumer goods.

Asian markets finished with robust gains for the week. China’s Shanghai composite rose 3.8%, India’s Sensex gained 1.8%, Hong Kong’s Hang Seng gained 3.3% and Japan’s Nikkei gained 1.3% for the week. China’s inflation eased to 4.1% in December, a 15month low, which gives the government increased flexibility to support growth as a possible global slowdown could hurt exports. China’s trade surplus expanded to $16.5 billion (US) in November. Imports grew by 11.8% year-on-year in December, while exports grew by 13.4%.

Looking ahead, markets will focus on data releases from China, U.S. and Europe, along with developments regarding the European debt crisis and debt negotiations in Greece.

This commentary is published as an information service for clients. This commentary is not intended to provide, and should not be construed as providing, individual financial, tax or investment advice. The information contained herein is drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed. Opinions expressed herein by the author and third parties may not necessarily reflect those of Craig & Taylor Associates and Insurance Agency Ltd.

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