Market Watch: April 16

Retail sales similarly surged in March, up 9.8 per cent, on the backs of stimulus money, vaccinations and business re-openings. There was also good news on the jobs front as fewer people applied for first-time unemployment benefits in the week ended April 10, a decrease from the prior week. Also in the U.S., Q1 earnings season got underway this week with many of America’s blue-chip companies already reporting strong earnings and outlooks for the year.

Across the Atlantic, European Parliament trade committees gave the go-ahead Thursday in favour of a post-Brexit trade and cooperation deal with the U.K. The full EU parliament must ratify the agreement later this month otherwise Britain and the EU would trade under WTO terms with tariffs and quotas.

In Canada, business sentiment rose to record levels at the start of 2021 on an improving economic outlook according to the BoC’s survey of executives. The survey showed sentiment rose to 2.9 in Q1, the highest since 2018 and the third highest since 2003.

Also in Canada, last Friday’s jobs report blew past expectations for a second month. The economy has now recovered all but 296,000 of the 3 million jobs lost during the pandemic. The unemployment rate now stands at 7.5 per cent.

In corporate news, Air Canada announced a deal with the federal government Monday that includes up to $5.4 billion in repayable loans and an equity stake for Ottawa. On Friday, China releases GDP numbers for Q1 with growth expectations soaring from last-year’s pandemic-induced downturn. U.S. and Canadian markets continue its ascent

For the four days covered in this report, the Dow added 235 pts. to close at 34,035, the S&P 500 rose 42 pts. to end at 4,170 and the Nasdaq jumped 139 pts. to finish at 14,038. In Canada, the TSX ended the period up 94 pts. to close Thursday’s session at 19,321.

Strategy

Canada’s red-hot housing market set a new all-time high in March

The number of homes sold rose 5.2 per cent on a month-over-month basis in March, with 76,000 houses sold which is nearly 14,000 more than the previous monthly sales record set last July. The monthly gain was likely the result of additional supply hitting the market. The number of listed properties jumped 7.5 per cent, and combined with February, supply is up more than 25 per cent in the past two months. The increase in supply caused the national sales-to-new-listings ratio to fall to 80.5 per cent from January’s peak of 90.9 per cent, but it is still well above the long-term average of 54.4 per cent as demand remains strong.

The MLS Home Price Index rose 3.1 per cent in the month and was up 20.1 per cent year-over-year. The number of months of housing inventory available, another measure of the supply and demand, reached 1.7 months, the lowest on record. Policymakers continue to watch the housing market. The banking regulator announced last week it is considering introducing a new benchmark interest rate, and the Liberals plan to present a tax on non-resident foreign homeowners. While we do not subscribe to the idea that foreign buyers are to blame for the most recent run-up, we believe the Federal government may enact some form of macro-prudential reform.

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Market Watch: April 16

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