BNN Bloomberg's mid-morning market update: August 30, 2019
After enduring a bumpy ride in August, investors in Canadian stocks need to brace for more volatility in September, typically the worst month of the year for equities.
In the past 10 years, the S&P/TSX Composite Index has dropped an average 1.5 per cent in September, as the end of summer, return to school and the start of a heavy conference agenda seem to be a bad combination for equities. The only other months with negative returns over the same period were October, June and January, according to data compiled by Bloomberg.
Don’t write off September just yet though, as the month has had its share of gains. The index has risen six of the last 10 Septembers, though massive declines in 2011, 2014 and 2015 pushed the average lower.
Investors can be forgiven for wanting to see August behind them. Global trade tensions roiled markets throughout the month, leading to wild swings up and down amid the China-U.S. showdown. After all the noise however, the benchmark is set to end the month little changed, after the best weekly gain since January as energy and mining stocks rallied with commodities.
Further along the Canadian equity train ride, the next stop is ‘Hobnob Station.’
Investors will head to conferences in Toronto and New York to hear from senior executives of major Canadian companies about their growth plans and the state of their industries. There will also be plenty of time for dinners, drinks and one-on-one meetings.
In Toronto, two events stand out:
- Scotiabank Financials Summit (Sept. 4-5): Presenters include C-Suite executives of the Big Six banks, life insurers like Manulife Financial Corp., Sun Life Financial Inc., top asset managers and private equity firm Onex Corp.
- Toronto Global Forum (Sept. 4-6): Former White House communications director Anthony Scaramucci -- who has set up a political action committee in a bid to prevent Donald Trump’s re-election -- will speak along with the CEOs of various Canadian corporations and Canadian provincial and federal ministers.
For Manhattan, investors are set to gather at the Sheraton Times Square Hotel for Barclays’ annual CEO Energy-Power conference, where majors like Suncor Energy Inc. will make presentations.
There’s one major event that will have economists and market participants on edge: Bank of Canada’s rate decision day on Sept. 4. While most expect no rate change, Governor Stephen Poloz’s comments on monetary policy will be watched closely, especially after GDP expanded 3.7% in the second quarter, beating the three per cent estimate. Investors are betting on a rate cut in October, based on trading in the swaps market.
Here’s a recap of what happened this week.
Markets -- Just The Numbers
- S&P/TSX Composite Index has rallied for four straight days, it’s longest winning streak in almost two months as U.S.-China trade tensions eased and a rally in oil and gold prices boosted stocks earlier in the week.
- Government bonds show U.S. economic prospects are worsening, with 10-year Treasuries yielding 37 basis points more than similar-maturity Canadian government debt, the smallest premium since October 2017.
- The Canadian dollar has strengthened by 0.2 per cent against the U.S. dollar this week.
- Goldman Sachs said investors should bet on declines in the loonie against the greenback and the yen as the Bank of Canada may soon join other central banks in a dovish shift.
Chart of the week
Canada recorded its largest inflow of foreign direct investment in four years, another sign growing global trade tensions haven’t reduced the appetite for investing into the Canadian economy. That probably reflected Newmont Mining Corp.’s $10 billion takeover of Goldcorp Inc. earlier this year.
August employment figures are expected on Sept. 6.
Celebrity alert! The star-studded Toronto International Film Festival -- from Sept. 5-15 -- is expected to bring the likes of three-time Academy Award winner Meryl Streep, Jennifer Lopez, “Crazy Rich Asians” star Constance Wu, Tom Hanks and Bruce Springsteen to Canada’s most populous city next week.
How big is this event? Here are some facts and figures:
- About 280,000 visitors are expected on Festival Street
- Over 330 titles will be shown at TIFF
- Almost 8,000 films were submitted
- More than 80 countries will be represented this year
- Longest film (840 minutes!): “Women Make Film: A New Road Movie Through Cinema”
- Shortest film (2 minutes): “Human Nature, Short Cuts”
1. Earlier this week, Toronto Raptors guard Jeremy Lin -- the first Asian American to have won an NBA championship -- announced a deal with the Beijing Ducks to play in the Chinese Basketball Association next season.
2. Shark Tank and Dragon’s Den star Kevin O’Leary confirmed that he was in a boat accident in Ontario’s Muskoka cottage country.
--With assistance from Steven Frank and Doug Alexander.