North American stocks edge up on final day of down week
The volatility that has characterized financial markets lately was back in full force this week. Markets around the world sold off steeply on concerns over the sovereign debt crisis in Europe, which expanded to send borrowing costs for Italy and Spain soaring. Nervousness in advance of bank “stress test” results also held European stocks back.
Things improved briefly during the week when Canadian stocks received a bit of a boost from improving optimism over the commodities outlook, particularly as a result of China’s 9.5% y-o-y economic growth in the second quarter. This growth points to a continued healthy appetite for commodities by the world’s largest consumer. This helped Canada’s stock market outperform most of its global counterparts during the week, posting a relatively small loss.
Comments mid-week by U.S. Federal Reserve Chairman Ben Bernanke also helped temporarily boost equities. He appeared to leave the door open to further Fed economic stimulus as he presented the central bank’s semi-annual report on the state of the economy. However, Bernanke later made it clear no immediate action was planned, which ended a brief rally.
Among negative economic developments, a political impasse over whether the U.S. federal borrowing limit should be raised, and fears that debt rating agencies could downgrade U.S. debt, hurt stocks. This overshadowed positive U.S. economic developments, including an unexpected small rise in June retail sales and a larger-than-expected decline in weekly jobless claims.
In Canada, the economic outlook remains largely positive. Businesses are maintaining their faith in the country’s economy and plan to hire more workers to support growth in the coming year, the Bank of Canada said in its latest business outlook survey. However, Canadian manufacturing sales fell by 0.8% in May over April, more than expected.
The second-quarter earnings season got underway in the U.S., with early positive results as 11of 13 companies beat expectations. Healthy earnings reports helped North American stocks edge up on the final day of a down week.
In other news this week:
•Gold prices hit record highs as investors sought refuge from economic concerns.
•Canadian housing starts were unexpectedly strong in June, rising by 1.7% over May. Sales of existing homes rose 2.6%. The average resale price was up 8.7% y-o-y but was skewed by expensive homes in Vancouver.
•Canada’s trade deficit narrowed marginally in May. Exports rose more than imports during the month.
•Overall inflation in the U.S. fell in June. Core inflation—which excludes volatile food and energy prices—rose.
•U.S. consumer confidence fell to its lowest level in more than two years in July.
•The U.S. notched its widest trade deficit in more than 2½ years in May. Exports fell as imports rose.
For a look at what's ahead for this week:
http://www.investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml
