October 21-25, 2013
In North America...
Markets: The S&P ended the week with a gain of 0.9%, leaving it at record highs. This was following growing expectations that US Monetary policy would continue, coupled with strong earnings reports by several companies. Canadian markets also did well, the TSX ended the week up 1.24 per cent, leaving the Toronto market up almost seven per cent year to date.
In the US, September job figures were released (delayed due to the shutdown). The numbers released were slightly lower than expectations, suggesting the pace of recovery may not be as fast as people previously thought. An interesting observation by Chris Iggo, chief investment officer of fixed income at Axa Investment Managers:
Growth in non-farm payrolls had slowed to the point that the six-month moving average in September was 163,000, compared with over 200,000 when Ben Bernanke, Fed chairman, started to hint at tapering in late spring.
Companies: Several companies reported earnings last week, notably in the tech arena. Amazon met analyst expectations and Microsoft topped them. Also in tech:
- Apple released new iPads; the iPad Air is a thinner version of the original iPad). Also included is Apple software similar to Microsoft Suite, but already installed. While some are excited for the new products, others saw it as Apple continuing to crows an already crowded market. Read more here.
- Nokia launched a tablet and a phablet
- Microsoft announced new Surface 2 and Surface 2 Pro tablets
- Google started using banner ads, breaking a promise from 2005 not to.
JP Morgan has continuing litigious issues: JPM and America’s Justice Department negotiated the final details of a settlement for mis-selling mortgage- backed securities that reportedly is going to cost the bank $13 billion. New evidence suggests JPMorgan may have another $6bn settlement near completion.
Otherwise: The Canadian Central Bank Governor, Stephen Poloz, admitted that growth forecasts in Canada have been overly optimistic and moved to remove bias. However, he gave very little in terms of forward guidance. Resultantly, the Canadian Loonie fell in price. Regarding an upcoming rate hike, Sheryl King writes:
An upturn in global growth is virtually the only cure for Canada’s current domestic malaise, since fiscal stimulus has been replaced by government belt-tightening, and ultra-low rates are no longer having much stimulative impact.
Interesting research by AT Kearney revealed that only 2% of the Chinese population are purchasing a third of global luxury goods consumption.
The FTSE 100 rose by 1.5% over the week and the UK economy grew by 0.8% - its fastest rate since 2010. However, the single currency gained on the pound towards the end of last week, reflecting optimism for Eurozone growth and recovery.
If Poloz gave little guidance to the next moves for the Bank of Canada (above), former governor Mark Carney, now governor to the Bank of England, was positively loquacious. At a speech given to celebrate the 125th anniversary of the Financial Times, Mark Carney emphasised the importance of the Financial sector to the growth of the UK. While shadow banking must be eliminated, and regulations in place, Carney note the CIty's importance - a shift away from his predecessor attitude, who advocated a smaller role for financial services.
Walk this way, by Aerosmith, represents the march towards recovery seen globally. Its also a cheeky comment on Stephen Poloz walking away from historic forecasts, and admitting Canadian economists have been overly optimistic.