As of the close of business last Friday, global equities were modestly lower on the week, while the yield on the benchmark US 10-year Treasury note rose eight basis points to 2.78%, having topped out early in the week at a three and a half year high of 2.83%. The price of a barrel of West Texas Intermediate crude oil rebounded to $104.40 from near $96 last Friday. Volatility, as measured by the Cboe Volatility Index (VIX), was little changed at 21.4.
Please note: We will be taking a two-week break and the next newsletter will be published on May 8th.
CANADIAN ECONOMIC NEWS
The Bank of Canada raised rates fifty basis points this past week in an effort to bring monetary policy quickly back toward neutral, the level where interest rates neither restrict nor spur economic growth. The BOC’s policy rate now stands at 1%, about 125 bps below where it estimates the neutral rate is. We believe the BOC will raise short-term rates another fifty basis points at their next meeting in April.
US ECONOMIC NEWS
With only about 7% of the constituents of the S&P 500 Index having reported for Q1 2022, blended earnings per share shows that earnings growth is running at 5.2% while sales rose about 10.9% compared with the same quarter a year ago. The pace of earnings growth has slowed dramatically from the nearly 31.5% reported in Q4 2021. Most companies reporting are continuing to exceed analysts’ estimates.
When it meets in early May, the US Federal Reserve is expected to raise rates by a half-point as several FOMC members have recently said they want to move the federal funds’ target toward neutral (believed to be close to 2.5% in the US) by the end of the year and then take another look at whether additional tightening will be necessary to tame inflation. Considering the very high inflation readings during the second quarter of 2021, several economists expect that year-over-year CPI readings will be found to have peaked in March. However, renewed supply chain concerns amid lockdowns in China suggest that inflation will take a while to normalise.
EUROPEAN ECONOMIC NEWS
The European Central Bank reiterated it would end its asset purchase program in Q3 and that gradual rate hikes would follow “some time” after it ends quantitative easing. Markets are pricing in a rate rise of about 0.7% by the end of the year.
JAPAN, CHINA and EMERGING MARKETS ECONOMIC NEWS
China lockdowns expected to crimp oil demand
Both the International Energy Agency and OPEC released forecasts that suggest growth in global oil demand should slow in 2022 because of ongoing lockdowns in China. Demand for fuel has fallen, factories are shut down and air travel is being curtailed in parts of the country because of a surge in COVID-19 cases. Chinese crude oil imports declined 14% in March partly because of reduced levels of mobility in many parts of the country. In other oil-related news, CNOOC, China’s largest offshore oil and gas producer, announced it will exit operations in the United States, Canada, and the United Kingdom in order to avoid being subject to Western sanctions. On Thursday, Chinese President Xi Jinping said his government will not relax its zero-COVID policy despite simmering public anger in Shanghai.
Our clients have been talking about us behind our backs… And they’ve had nothing but nice things to say!
Danie and Gail, two of our Dream Harbour family members—aka clients—say we give them peace of mind that they’re on the right path. They’ve placed so much faith in us that even their two adult kids and their partners work with us. I guess you could say we have a generational effect!
We’re honoured that Danie and Gail agreed to film this short video for us. Click here to watch, or paste this link into your browser: https://www.dreamharbour.ca/our-clients/ .