At the close of business last Friday, global equities were slightly lower on the week as rising yields offered investors an alternative to stocks. The yield on the US 10-year Treasury note rose 0.19% to 3.72% from a week ago while the price of a barrel of West Texas Intermediate crude oil added $1 to reach $78.50. Volatility, as measured by the Cboe Volatility Index (VIX), rose to 21.5 from 18.5 last Friday.
CANADIAN ECONOMIC NEWS
Job gains in Canada in January exceeded expectations by a factor of ten. The country saw 150,000 new hires last month versus forecasts of a 15,000 gain. The unemployment rate held steady at 5%. Following this news, our central bank following confirmed its position to take a pause on additional rate hikes.
US ECONOMIC NEWS
With about 69% of the constituents of the S&P 500 Index having reported for Q4 2022, blended earnings per share show that earnings declined 5% while sales rose about 4.7% compared with the same quarter a year ago. About 70% of reporters have beaten consensus EPS expectations.
Numerous US Federal Reserve officials addressed the economic outlook this past week, and a strong consensus appears to have developed that the central bank is making progress on bringing inflation down. However Chair Jerome Powell warned that if tight labour market conditions persist, a higher peak in the Fed’s policy rate may be needed.Since the FOMC meeting last week, markets have priced in an additional rate hike of 25 basis points on March 22nd.
US weekly jobless claims edged up slightly to 196,000 on Thursday but remain at a historically low level.
Goldman Sachs this past week cut its odds of a US recession in the next 12 months to 25% from 35%.
EUROPEAN ECONOMIC NEWS
After a delay in the data, Germany reported that preliminary inflation for January eased to 9.2% from 9.6% in December. We believe inflation is at risk of becoming entrenched if the ECB lets up on the inflation fight too soon. Therefore, we see more rate increases ahead for Europe.
JAPAN, CHINA and EMERGING MARKETS ECONOMIC NEWS
Press reports indicate that Japan’s government is considering nominating a new governor of the Bank of Japan this coming week. Confirmation hearings for the governor and two deputies would then take place in March. The term of current Governor Haruhiko Kuroda ends on April 8th.On Friday, Nikkei reported that Kazuo Ueda, an academic and former member of the BOJ board, is the likely nominee for the post.