The week ending December 16th saw major markets around the globe decline, as strains emerged among European Union members over the agreement following their summit to tackle the debt crisis and a possible downgrade of European debt by S&P strengthened.
The S&P/TSX Composite Index declined 3.3% with all ten sectors ending the week with negative returns. Bank of Canada governor, Mark Carney, outlined key risks to the Canadian economy with the focus on the effects of a period of global deleveraging. Two major risks factors have increased over the past six months, which include global sovereign debt conditions and economic downturns in developed economies. On another note, manufacturing data declined by 0.8% month-on- month, which followed three consecutive months of gains. The decline was attributed to lower sales of petroleum and coal product manufacturers.
U.S. equities declined for the week, in spite of some positive economic data. The S&P 500 Index, Dow Jones Index and the Nasdaq were down by 2.8%, 2.6% and 3.5% respectively. The U.S. Federal Reserve issued a statement that the U.S. economy continued to expand moderately in spite a slowdown in global growth. In order to continue supporting the slow growth of the economy, the benchmark interest rate was kept at 0.25%. Consumer prices in the U.S. were unchanged in November on a month-on-month basis. Initial jobless claims for the week ending December 10th decreased to 366,000, which indicates some strengthening in the labour market and the economy as a whole. Lastly, retail sales rose in November by 0.2% month-on-month, with increases in demand for automobiles, apparel and electronics.
European markets were down for the week as a lack of sovereign debt resolution and a weak economic outlook for the region plagued markets. The German DAX, the U.K.’s FTSE, and France’s CAC lost 4.8%, 2.6%, 6.3% respectively. Eurozone exports declined in October by 1.9% month-on-month, which was large attributed to declines in Germany and Spain. Industrial production fell in October by 0.1%, led by a drop in the output of energy and intermediate goods such as steel.
Asian markets were down for the week on disappointing economic data. China’s Shanghai composite lost 3.9%, India’s Sensex lost 4.5%, Hong Kong’s Hang Seng was down 1.6% and Japan’s Nikkei lost 1.6% for the week. Manufacturing in China may contract for a second month in December after The HSBC Flash China Manufacturing PMI showed a reading of 49.0. This was an increase from the prior month; however, readings under 50.0 indicate the possibility of contraction.
Economic releases in Canada for the week ahead include consumer price index, real GDP, retail sales and wholesale trade. In the U.S., investors will focus on real GDP, leading indicators, housing starts and personal income.
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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