Market insights
Weekly Market Commentary - July 23, 2010
Global stock markets surge on healthy earnings, European economic results
Global stock markets surged this week on a torrent of mainly strong earnings results, and surprisingly strong economic reports out of Europe, largely shrugging off mixed domestic economic reports pointing to some slowing in the pace of growth in North America. With the exception of the Nikkei, all major global stock markets were in positive territory for the five days ended July 23, 2010.
At the midway point and the busiest time of the earnings season, this week saw results reported by tech titans Apple Inc., Microsoft Corp., Yahoo! Inc., Qualcomm Inc., Texas Instruments Inc., as well as IBM Corp. and financial global investment banking and securities firm, The Goldman Sachs Group. Although earnings at IBM and Goldman Sachs came in at less than expected, earnings per share topped forecasts. Yahoo! underperformed, but Apple handily shot past expectations with a revenue outlook that also topped forecasts. Financial services companies Morgan Stanley and Wells Fargo also beat analyst expectations as did The Coca-Cola Company. Caterpillar Inc., UPS Inc., 3M Co., and AT&T Inc., also beat estimates and offered positive outlooks for the remainder of the year.
Later in the week, Verizon Communications Inc., Ford Motor Company, American Express Co., and McDonald’s Corporation all released results that exceeded expectations, while Kimberly Clark, and Amazon.com Inc., disappointed.
Also buoying the markets were strong economic reports out of Europe. Index results released Thursday showed accelerating growth in the region’s manufacturing and sales industries. Signs of growth were a welcome relief for market participants who have been seeking some reassurance about Europe’s ability to overcome its debt issues. European stress test results released Friday also provided reassurance, showing that 84 of 91 banks or more than 92% passed a test designed to measure Europe’s banking sector strength in a worst-case- debt scenario. The EU said the results confirm the overall resilience of the continent’s banking system.
Meanwhile in the U.S., housing starts were down, jobless claims were up, and U.S. Federal Reserve Chair Ben Bernanke acknowledged a slowing growth environment in his semi-annual testimony to Congress about the state of the economy. Lawmakers heard that Bernanke does not expect the economy to stall and does not foresee any extra policy measures being required but reiterated the Fed is prepared to step in as needed.
The Bank of Canada indicated Canada’s economic growth is moderating, but remained confident enough in the strength of the economic situation to raise its policy rate a quarter point to 0.75%, its second rate increase in two months.
Economic recoveries do not occur in a straight line. They are often bumpy and it is not uncommon to see mixed results at this juncture of the cycle. This type of environment is representative of both the health and breadth of the turnaround currently underway.
Other market and economic events this week:
- Building permits in Canada were up 2.1%
- Canadian wholesale sales off by 0.1% in May
- Existing home sales in the U.S. fell 5% in June, better than expected
- U.S. housing prices were up 1% from the prior year
- U.S. mortgage rates hit record lows with an average rate of 4.56% for a 30-year fixed rate loan
- Leading indicators slipped a slight 0.2% in June
- National Association of Home Builders monthly reading of builder sentiment in the U.S. sank to 14 in early July from 16 in June
What’s ahead next week:
Canada:
- Industrial product price index
- GDP
U.S.:
- New home sales
- Consumer and investor confidence
- Durable goods orders
- Consumer sentiment
- GDP
This week's market closing values
Level |
Change |
1-week |
YTD |
1-year |
5-year |
|
EQUITY INDICES |
CAD |
CAD |
CAD |
CAD |
||
|---|---|---|---|---|---|---|
| S&P/TSX | 11,714.21 |
+ 144.56 |
+ 1.25% |
- 0.27% |
+ 9.73% |
+ 2.46% |
| S&P 500 | 1,102.66 |
+ 37.78 |
+ 2.05% |
- 1.83% |
+ 8.10% |
- 5.29% |
| DJIA | 10,424.62 |
+ 326.72 |
+ 1.75% |
- 0.76% |
+ 10.02% |
- 3.55% |
| FTSE 100 | 5,312.62 |
+ 153.77 |
+ 2.18% |
- 7.06% |
+ 3.77% |
- 5.17% |
| CAC 40 | 3,607.05 |
+ 106.89 |
+ 1.04% |
- 18.43% |
- 7.70% |
- 5.80% |
| DAX | 6,166.34 |
+ 126.07 |
+ 0.09% |
- 8.72% |
+ 1.46% |
+ 2.97% |
| Nikkei | 9,430.96 |
+ 22.60 |
- 1.93% |
- 6.85% |
+ 0.29% |
- 2.58% |
| Hang Seng | 20,815.33 |
+ 565.17 |
+ 1.35% |
- 5.69% |
+ 0.31% |
+ 3.74% |
CURRENCY RETURNS |
CAD |
Change |
||||
|---|---|---|---|---|---|---|
| US$ | 1.0364 |
- 0.0218 |
- 2.06% |
- 1.60% |
- 4.82% |
- 3.20% |
| Euro | 1.3385 |
- 0.0298 |
- 2.18% |
- 11.27% |
- 13.09% |
- 1.87% |
| Yen | 1.1845 |
- 0.0379 |
- 3.10% |
+ 4.65% |
+ 3.27% |
+ 1.59% |
CANADIAN TREASURIES |
Yield |
Change |
COMMODITIES |
USD |
Change |
|
|---|---|---|---|---|---|---|
| 3-month | 0.61 |
+ 0.04 |
Oil | $78.99 |
+ $2.98 |
|
| 5-year | 2.44 |
+ 0.02 |
Gold | $1,188.20 |
- $4.80 |
|
| 10-year | 3.23 |
+ 0.07 |
Natural Gas | $4.69 |
+ $0.02 |
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