AGF INVESTMENTS September 11, 2017 A recap of last week s top economic news and what s to come. WEEKLY MARKET REVIEW BANK OF CANADA HIKES RATES ONCE AGAIN The Bank of Canada (BoC) held firm on its plans of normalizing policy rates, raising the overnight rate by 25 basis points to 1%, which follows a similar hike in July. The move comes in light of strong economic growth during the second quarter, expanding at the fastest quarterly pace in six and a half years. Markets were caught off guard by the hike, which resulted in the Canadian dollar appreciating sharply and yields moved higher across the yield curve. The BoC s accompanying remarks were decidedly hawkish, stating the removal of considerable stimulus is warranted, which may suggest a third hike before year-end. CANADIAN ECONOMY CONTINUES TO ADD JOBS The Canadian economy added 22,000 jobs in August, recording a ninth-straight month of positive growth. The better-than-expected result lowered the unemployment rate to a cycle-low of 6.2%. Beyond the headline number, full-time positions fell by 88,100 as part-time work fully supported August s gain. Total hours worked inched lowered as well, down 0.1%. Positively, wage growth picked up to 1.8% annualized, from 1.3% previously. Regionally, Ontario led with 31,000 new jobs, bringing the province s unemployment rate to a 17- year low of 5.7%. Still, Manitoba and British Columbia hold the lowest jobless rates in Canada at 4.9% and 5.1%, respectively. ECB DEFERS DECISIONS TO OCTOBER The European Central Bank (ECB) held policy rates unchanged at its September meeting. The ECB offered little on easing plans beyond December s expiration of the 60 billion monthly purchases currently in place. The ECB stated the bulk of these decisions will be taken in October, though did refer to calibration of easing measures, which could be interpreted as continuation into 2018. Affected by the strengthening euro, reaching three-year highs during the week, inflation expectations were marked down over the next two years. Growth forecasts were revised slightly higher this year to 2.2%, though unchanged for 2018 and 2019 at 1.8% and 1.7%, respectively. 1
OTHER ECONOMIC NEWS The U.S. ISM Non-Manufacturing PMI rose 1.4 points to 55.3 in August. Business activity, new orders and employment all improved during the month as 15 of 17 industries reported growth. The positive month was not enough to fully erase July s significant drop, which fell to 53.9, and still held the latest print below 2017 s average of 56.2. Canada s trade deficit narrowed to $3 billion in July, down from around $3.75 billion in the prior month. Exports slumped 4.9%, while imports decreased 6%, both largely due to widespread price decreases. Related to ongoing NAFTA talks, Canada s trade deficit with the U.S. widened to $2.9 billion in July, while maintaining an aggregate trade surplus with other nations. WHAT S TO COME U.S. INFLATION AND CANADIAN HOUSING The U.S. reports August inflation data on Thursday ahead of the Federal Reserve meeting next week. Canadian data features an updated on housing with existing home sales and housing starts reported on Monday. August s industrial production will be released from several countries through the week, including the U.S., eurozone, China and Japan. Sources: BMO Economics, Ned Davis Research, TD Economics, CBC as of September 8, 2017 2
Return (% ) Annualized Return (% ) CANADIAN EQUITY INDEXES ($CDN) Close Week YTD 1 YR 3YR 5 YR 10 YR 52 wk high 52 wk low S&P/TSX Composite PR Index 14,985-1.4-2.0 1.2-1.1 4.1 0.9 15,943 14,319 S&P/TSX Composite TR Index 49,439-1.3-0.1 4.1 1.8 7.2 4.0 48,697 46,048 Energy TR 3,351-0.9-14.7-9.0-10.7-1.0-0.6 3,875 3,495 Materials TR 2,721-2.0 4.3-5.0 0.3-4.8-1.2 2,812 2,587 Industrials TR 3,649-1.0 8.9 14.8 5.4 16.1 9.7 3,375 3,085 Consumer Disc. TR 3,131 0.6 11.8 14.8 9.8 18.8 7.8 2,789 2,673 Consumer Staples TR 5,621-0.6 0.1-3.5 12.9 19.0 11.7 5,766 5,524 Health Care TR 396-0.1-14.4-45.8-42.4-18.9-1.4 707 469 Financials TR 4,564-1.9 1.0 13.4 6.9 13.2 7.1 4,397 3,954 Information Technology TR 260-1.4 7.9 10.3 14.4 21.0-2.2 245 232 Telecom Services TR 2,893-1.5 8.1 5.1 11.5 11.8 8.3 2,735 2,591 Utilities TR 4,603 0.1 10.1 8.9 9.7 7.5 6.5 4,152 3,958 S&P/TSX 60 TR Index 2,346-1.3-0.4 5.2 2.5 7.8 4.0 2,324 2,165 MSCI Canadian Small Cap PR Index 345-1.0-1.4-4.2-3.8 1.2 0.3 372 327 Return (CAD, % ) Annualized Return (CAD, % ) WORLD EQUITY INDEXES (local) Close Week YTD 1 YR 3YR 5 YR 10 YR 52 wk high 52 wk low CAC 40 PR Index 5,113-0.8 8.2 13.1 5.6 11.1-0.5 5,442 4,311 DAX 30 PR Index 12,304 0.7 10.3 15.8 9.1 14.8 5.2 12,952 10,175 DJIA PR Index 21,798-2.8-0.5 10.8 12.1 15.3 6.7 22,179 17,884 DJIA TR Index 46,733-2.8 1.3 13.6 15.0 18.2 9.6 47,374 37,469 FTSE 100 PR Index 7,378-1.1-0.4 0.2-0.8 5.4-1.1 7,599 6,654 FTSE 100 TR Index 6,211-1.0 2.8 4.3 3.1 9.4 2.7 6,320 5,384 FTSE/Xinhua A200 9,895-1.1 13.9 13.7 16.9 13.7-1.4 10,035 8,090 Hang Seng PR Index 27,668-2.8 12.7 7.9 6.5 11.5 2.9 28,128 21,489 Hang Seng TR Index 74,368-2.7 16.6 12.2 10.5 15.7 6.5 75,177 56,043 MSCI EAFE TR Index 7,703-1.2 7.3 9.2 7.4 13.4 3.8 7,703 6,199 MSCI Emerging Markets TR 2,363-2.0 16.5 13.4 6.2 9.9 4.2 2,363 1,774 MSCI Europe TR Index 9,678-1.0 9.5 11.3 6.8 13.2 3.6 9,678 7,486 MSCI Far East Free (ex-japan) TR 1,366-2.0 19.1 14.4 9.7 13.7 6.1 1,366 1,016 MSCI World TR Index 7,859-2.0 3.1 8.4 10.4 16.1 6.7 7,868 6,499 MSCI World AC TR Index 947-2.0 4.5 9.0 10.0 15.4 6.4 947 778 NASDAQ Composite PR 6,360-3.1 6.6 13.6 15.3 20.3 11.1 6,461 5,034 Nikkei 225 PR 19,275-1.9-1.6 1.4 10.1 14.3 3.8 20,318 16,112 Russell 2000 TR 6,854-3.0-6.1 5.9 11.3 17.2 9.1 6,739 5,600 Russell 2000 Growth TR 6,016-2.7-0.2 7.3 11.9 17.9 9.9 5,620 4,765 Russell 2000 Value TR 10,535-3.2-11.5 4.5 10.6 16.5 8.2 11,042 8,879 S&P 500 PR Index 2,461-2.6-0.8 6.0 10.8 16.3 6.9 2,491 2,084 S&P 500 TR Index 4,487-2.4 1.0 8.6 13.4 18.8 9.3 4,414 4,159 Shanghai Comp PR 3,365-0.9 4.7 5.0 15.1 13.9-1.6 3,391 2,969 ECO_RELEASE_DT Interest Rates Bank of Canada Overnight Lending Rate Bank of England Repo Rate European Central Bank Min bid rate at refi tender Federal Funds Target Rate Current 1.00% 0.25% 0.00% 1.25% Next Meeting 10/25/2017 9/14/2017 10/26/2017 9/20/2017 3
Total Ret (% ) Historical Prices Commodities ($US) Close Week YTD 1 YR 3YR 5 YR 10 YR 52 wk high 52 wk low Copper 302-2.5 20.6 210 316 366 326 316 206 Corn 344 1.3-2.2 327 339 795 331 395 318 Crude Oil 47.48 0.4-11.6 47.62 92.66 96.42 76.70 55.24 42.05 Gold 1,346 1.6 16.9 1,338 1,255 1,736 701 1,358 1,121 Natural Gas 2.89-5.9-22.4 2.81 3.88 2.68 5.50 3.99 2.52 Nickel 11,532-3.8 15.6 10,300 19,856 16,448 26,785 12,202 8,700 Platinum 1,008 0.0 11.5 1,085 1,399 1,592 1,289 1,067 889 Soybeans 957 1.5-4.0 992 1,091 1,732 891 1,080 900 Silver 17.96 1.3 12.8 19.62 19.03 33.68 12.51 20.07 15.19 Wheat 414-1.6 1.4 377 534 885 840 554 370 Zinc 3,030-4.9 18.2 2,305 2,379 1,949 2,776 3,207 2,053 CPN MATURITY Bond Yields Coupon Maturity Date Canada 2 Year Treasuries 0.750 8/1/2019 10 Year Treasuries 1.000 6/1/2027 30 Year Treasuries 2.750 12/1/2048 ECB 2 Year Treasuries 0.000 9/13/2019 10 Year Treasuries 0.500 8/15/2027 30 Year Treasuries 2.500 8/15/2046 Japan 2 Year Treasuries 0.100 9/15/2019 10 Year Treasuries 0.100 9/20/2027 30 Year Treasuries 0.800 9/20/2047 US 2 Year Treasuries 1.250 8/31/2019 10 Year Treasuries 2.250 8/15/2027 30 Year Treasuries 2.750 8/15/2047 Current Price 98.57 91.36 109.00 101.55 101.85 134.36 0.00-0.01 0.81 99.97 101.77 101.64 Yield to Maturity 1.52 1.98 2.34-0.77 0.31 1.11 0.00-0.01 0.81 1.26 2.05 2.67 Total Ret (% ) Historical Prices Currencies Close Week YTD 1 YR 3YR 5 YR 10 YR 52 wk high 52 wk low CAD / EURO 0.68 0.46-3.37 0.69 0.71 0.80 0.69 0.73 0.65 CAD / USD 0.82 1.96 10.54 0.77 0.91 1.02 0.95 0.83 0.73 CAD / UK POUND 0.62 0.06 3.40 0.58 0.57 0.64 0.47 0.64 0.56 USD / AUSTRALIAN $ 1.24-1.11-10.64 1.31 1.08 0.96 1.21 1.40 1.23 USD / BRAZIL REAL 3.09-1.69-5.16 3.21 2.27 2.03 1.95 3.51 3.04 USD / EURO 0.83-1.47-12.60 0.89 0.78 0.78 0.73 0.97 0.83 USD / MEXICAN PESO 17.71-0.58-14.55 18.67 13.14 12.98 11.14 22.04 17.45 USD / UK POUND 0.76-1.84-6.44 0.75 0.62 0.62 0.49 0.83 0.75 USD / YEN 107.84-2.19-7.80 102.49 106.03 78.24 113.38 118.66 100.09 Source: Bloomberg, as of September 8, 2017 4
Commentaries contained herein are provided as a general source of information based on information available as of September 8, 2017 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Published Date: September 11, 2017 5