U.S. equities finished higher on Friday as investors digested concerns about Donald Trump’s presidency and remained cautiously optimistic towards the low impeachment odds against him.
The Dow Jones industrial average jumped 141.82 points (0.69%) to settle at 20,804.84, mostly driven by gains from Boeing and Caterpillar. The S&P 500 rose 16.01 points (0.68%) to finish at 2,381.73, led by industrial stocks. The tech-heavy Nasdaq composite advanced 28.57 points (0.47%) to finish at 6,083.70. However, all major U.S. indices finished in the red for the week as a whole, due to the massive selloff on Wednesday, pertaining to Donald Trump’s obstruction of justice (discussed below).
On Monday, China reported retail sales and industrial production results in April, both surprisingly showing a slowdown, despite a strong start witnessed earlier in the year. Retail sales rose 10.7% YoY in April (vs. 10.9% in March), driven by larger enterprises where sales growth was lowered to 9.2% (vs. 10.0% in March). The country’s industrial production was up 6.5% in April (vs. 7.6% in March), well below street consensus of 7.1%.
In addition, Greece re-entered into recession, the fifth time in the past decade. The nation’s real GDP has already shrank more than 25% since the beginning 2007. Nevertheless, austerity measures will likely be approved and Greece will receive its bailout funds from its creditors (again..). These austerity measures have almost always included government spending cuts and raising taxes, and this will inevitably (once again) push the economy into recession. Down the road, more jobs will be lost and less taxes will be collected by the government to service its debt, thereby more austerity measures will be implemented in order to secure another debt relief deal. The vicious cycle of recession just does not seem to go away.
On Tuesday, the U.K. inflation in April surprised to the upside and climbed higher to 2.7% YoY (vs. 2.3% in March), driven by higher airline prices. Despite the continued pick-up in inflation, real wage growth remains stagnant. This will likely raise the prospect of rising interest rate by the Bank of England in order to taper the inflation, but this could strangle the modest economic growth (0.3% Q1 2017) the country is barely holding on to.
On Wednesday, Japan’s Real GDP grew by 0.5% QoQ in the first quarter of 2017, which marked the expansion in the economy for the fifth straight quarter, a milestone that has not been witnessed since 2006. In addition, the final CPI and core CPI inflation readings for the eurozone in April were confirmed at 1.9% and 1.2%, respectively.
Further, former FBI director James Comey released his memo against Donald Trump, suggesting that the President pressured him to dismiss the investigation of Former National Security Advisor Michael Flynn and his Russian contacts. The discussion by the media over the “obstruction of justice” as well as “impeachment” took spotlight, and it seems more people are supporting the notion of independent investigation into Trump’s potential ties with Russia, according to Reuters.
The financial markets reacted adversely and the stock market had the biggest drop in eight months as investors became more concerned about the negative implication of this development on the prospect of health care plan, tax reform, and infrastructure spending. As a result, Financials, Industrials, and Info Tech sectors took a hit.
On Thursday, an unexpected jump in U.K. retail sales in April helped push the pound to its highest level in eight months. The country’s retail sales rose 2.3% in April (vs. -1.4% in March), thanks to a drop in store prices. Nevertheless, should investors become prematurely upbeat about this economy given the outlook of falling real wages and modest employment growth, let alone the continued political turmoil?
In addition, Brazilian equities plummeted over 10% on an emerging scandal associated with the country’s President Michel Temer, who was revealed to give his blessing to an attempt to pay a potential witness to remain silent in the country’s biggest-ever graft probe. However, Mr. Temer declared no wrongdoing was conducted on his end and refused to resign.
As a result, both the Brazilian stock market and short-term government bond fell sharply.
The country has been gradually pulling out of the worst recession in decades; however, this development could significantly slow down the recovery process and the nation could continue to see substantial political instability and downside risks to its economic activity.
On Friday, Statistics Canada announced the country’s inflation rate remained unchanged at 1.6% YoY in April, as higher gasoline and natural gas prices offset lower food costs. The softened inflation data will likely be the emphasis during Bank of Canada’s interest rate meeting next week, alongside the increasingly elevated household debt to income (which has been partially fueled by cheap mortgage loans).
Here is another chart which includes the low prime rate and average 5-year fixed mortgage rate in Canada. How much further down / up could the rates / household leverage go before we see a reversal (i.e.: correction)?
The week ahead: Germany will release its Q1 2017 GDP results and the U.S. will report its New Home Sales for April on Tuesday (May 23); Bank of Canada will meet to set interest rates and the U.S. will release its Existing Home Sales figures for April on Wednesday (May 24); OPEC will conclude its two-day policy-setting meeting on Thursday (May 25); The G7 summit will commence in Taormina, Sicily, on Friday (May 26).
Tops News
AMJourney 
Market Commentary – May 19, 2017
U.S. equities finished higher on Friday as investors digested concerns about Donald Trump’s presidency and remained cautiously optimistic towards the low impeachment odds against him.
The Dow Jones industrial average jumped 141.82 points (0.69%) to settle at 20,804.84, mostly driven by gains from Boeing and Caterpillar. The S&P 500 rose 16.01 points (0.68%) to finish at 2,381.73, led by industrial stocks. The tech-heavy Nasdaq composite advanced 28.57 points (0.47%) to finish at 6,083.70. However, all major U.S. indices finished in the red for the week as a whole, due to the massive selloff on Wednesday, pertaining to Donald Trump’s obstruction of justice (discussed below).
On Monday, China reported retail sales and industrial production results in April, both surprisingly showing a slowdown, despite a strong start witnessed earlier in the year. Retail sales rose 10.7% YoY in April (vs. 10.9% in March), driven by larger enterprises where sales growth was lowered to 9.2% (vs. 10.0% in March). The country’s industrial production was up 6.5% in April (vs. 7.6% in March), well below street consensus of 7.1%.
In addition, Greece re-entered into recession, the fifth time in the past decade. The nation’s real GDP has already shrank more than 25% since the beginning 2007. Nevertheless, austerity measures will likely be approved and Greece will receive its bailout funds from its creditors (again..). These austerity measures have almost always included government spending cuts and raising taxes, and this will inevitably (once again) push the economy into recession. Down the road, more jobs will be lost and less taxes will be collected by the government to service its debt, thereby more austerity measures will be implemented in order to secure another debt relief deal. The vicious cycle of recession just does not seem to go away.
On Tuesday, the U.K. inflation in April surprised to the upside and climbed higher to 2.7% YoY (vs. 2.3% in March), driven by higher airline prices. Despite the continued pick-up in inflation, real wage growth remains stagnant. This will likely raise the prospect of rising interest rate by the Bank of England in order to taper the inflation, but this could strangle the modest economic growth (0.3% Q1 2017) the country is barely holding on to.
On Wednesday, Japan’s Real GDP grew by 0.5% QoQ in the first quarter of 2017, which marked the expansion in the economy for the fifth straight quarter, a milestone that has not been witnessed since 2006. In addition, the final CPI and core CPI inflation readings for the eurozone in April were confirmed at 1.9% and 1.2%, respectively.
Further, former FBI director James Comey released his memo against Donald Trump, suggesting that the President pressured him to dismiss the investigation of Former National Security Advisor Michael Flynn and his Russian contacts. The discussion by the media over the “obstruction of justice” as well as “impeachment” took spotlight, and it seems more people are supporting the notion of independent investigation into Trump’s potential ties with Russia, according to Reuters.
The financial markets reacted adversely and the stock market had the biggest drop in eight months as investors became more concerned about the negative implication of this development on the prospect of health care plan, tax reform, and infrastructure spending. As a result, Financials, Industrials, and Info Tech sectors took a hit.
On Thursday, an unexpected jump in U.K. retail sales in April helped push the pound to its highest level in eight months. The country’s retail sales rose 2.3% in April (vs. -1.4% in March), thanks to a drop in store prices. Nevertheless, should investors become prematurely upbeat about this economy given the outlook of falling real wages and modest employment growth, let alone the continued political turmoil?
In addition, Brazilian equities plummeted over 10% on an emerging scandal associated with the country’s President Michel Temer, who was revealed to give his blessing to an attempt to pay a potential witness to remain silent in the country’s biggest-ever graft probe. However, Mr. Temer declared no wrongdoing was conducted on his end and refused to resign.
As a result, both the Brazilian stock market and short-term government bond fell sharply.
The country has been gradually pulling out of the worst recession in decades; however, this development could significantly slow down the recovery process and the nation could continue to see substantial political instability and downside risks to its economic activity.
On Friday, Statistics Canada announced the country’s inflation rate remained unchanged at 1.6% YoY in April, as higher gasoline and natural gas prices offset lower food costs. The softened inflation data will likely be the emphasis during Bank of Canada’s interest rate meeting next week, alongside the increasingly elevated household debt to income (which has been partially fueled by cheap mortgage loans).
Here is another chart which includes the low prime rate and average 5-year fixed mortgage rate in Canada. How much further down / up could the rates / household leverage go before we see a reversal (i.e.: correction)?
The week ahead: Germany will release its Q1 2017 GDP results and the U.S. will report its New Home Sales for April on Tuesday (May 23); Bank of Canada will meet to set interest rates and the U.S. will release its Existing Home Sales figures for April on Wednesday (May 24); OPEC will conclude its two-day policy-setting meeting on Thursday (May 25); The G7 summit will commence in Taormina, Sicily, on Friday (May 26).
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About AM_Journey
A small potato working on Bay Street