Weekly Commentary – Ending 12/09/2011

The week ending December 9th saw mixed results in equity markets around the globe. Much of the attention centered on the European Union Summit in Brussels and disappointing November economic data in China.

The S&P/TSX Composite Index declined 0.3% with six of ten sectors ending the week with negative returns. The Bank of Canada left its benchmark interest rate unchanged, at 1.0%. It cited deterioration in global financial markets, as a result of the European debt crisis, in its decision. On the domestic side, Canadian growth slightly exceeded the central bank’s expectations but future slowing is expected. Inflation has been higher than anticipated; however, it is expected to decline.

U.S. equities gained on for the week, on the back of positive economic and employment data releases. The S&P 500 Index, Dow Jones Index and the Nasdaq were up by 0.9%, 1.4% and 0.8% respectively. Initial jobless claims fell in the week of December 3rd to 381,000, a nine month low, which suggests that the labour market is slowly recovering. Furthermore, there was an increase in the preliminary University of Michigan Confidence index for December, with lower gasoline prices and a drop in unemployment that helped boost confidence.

European markets were mixed in anticipation of the European Union Summit late in the week. The German DAX and the U.K.’s FTSE lost 1.5% and 0.4% respectively. However, France’s CAC gained 0.2%. Earlier in the week the European Central Bank (ECB) cut the benchmark interest rate by 25 basis points to an all-time low of 1.0% in order to stimulate slowing growth. The main focus was the Summit held late in the week where European leaders agreed to a package of measures designed to enforce fiscal discipline on all member countries. Not all members agreed to the proposal with notable refusal form the U.K., which was unable to secure safeguards for the City of London.

Asian markets were down for the week on disappointing economic data. China’s Shanghai composite lost 1.9%, India’s Sensex lost 3.8%, Hong Kong’s Hang Seng was down 2.4% and Japan’s Nikkei lost 1.2% for the week. China’s inflation declined in November to an annual rate of 4.2%, which was the lowest level in 12 months. Moreover, output slowed to 12.4%, less than expected and the smallest increase since August 2009.

The week ahead will focus on European developments along with a policy announcement from the Federal Open Market Committee on the U.S. economy.

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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