By Scotia Wealth Management - The Zukiwsky Group

sponsored

Market Watch: April 24, 2020

Apr 24, 2020 | 12:40 PM

Big Picture

Volatile Oil Prices Take Investors on Wild Ride

U.S. stocks declined sharply on Monday, signaling the start of another volatile week, after U.S. crude futures entered negative territory for the first time in history. The front-month May futures contract ended the day at negative $37 a barrel, leaving some producers having to pay buyers to take oil away or store it, as oil demand nearly vanishes in light of the pandemic. Year to date, the S&P energy index has lost 45%, by far the worst performer among 11 sectors. By Monday’s close, the Dow had dropped nearly 600 points, while the Nasdaq shed 89. Despite oil’s continued fall, the TSX climbed 28 points, buoyed by rising sentiment for Shopify, which climbed nearly 7% on the day.

It was another rough day Tuesday as further declines in oil prices dragged down everything from stocks to currencies, adding even more urgency to the crisis sweeping the energy industry. Major U.S. indexes opened sharply lower and continued falling in afternoon trading as the oil selloff gained steam. The Dow plunged over 600 points Tuesday, while the TSX fell more than 3%, and the loonie dropped to a near three-week low. Even gold declined, as investors scrambled for cash to cover other positions.

N.A. markets rallied Wednesday, however, to claw back some of the week’s losses, as Brent crude was up nearly 6% for the day. Adding to the positive sentiment was news that U.S. lawmakers were on track to approve roughly $500 billion in aid for U.S. small businesses struggling from the impact of the coronavirus outbreak. By Wednesday’s close, the TSX was up nearly 350, while the Dow jumped almost 500.

Prevention, Access, Recovery, and Coordination

Safe Harbour officially hands over shelter keys, establishes accessible navigation hub

18h ago

lacombe and sylvan lake

December 2025 (un)employment data released for Alberta sub-regions

19h ago

21 years with WCPS

Darcy Blum appointed principal of Lacombe Outreach School

20h ago

Positive sentiment continued on Thursday as signs of progress against the virus are fuelling hopes that many local economies could soon begin to ease lockdown measures. There was also more good news as oil prices climbed on signs of recovering demand in China, and weekly U.S. jobless claims appeared to be easing–although the total over the last five weeks has now reached 26 million. By Thursday’s close, U.S. and Canadian indexes essentially finished flat.

Falling Oil Weighs on N.A. Markets

For the four days covered in this report, the Dow dropped 727 points to close at 23,515, the S&P 500 lost 77 points to settle at 2,798, while the tech-heavy Nasdaq declined 155 points to close at 8,495. In Canada, the TSX was off 109 points to end at 14,251.

Strategy

The Canadian economy was on relatively solid footing pre-crisis and now faces recovery challenges

The Canadian economy is in the midst of its deepest contraction since the Great Depression, as the COVID-19 pandemic has led to wide-spread business closures and dramatically reduced global energy demand. While the drop in activity will be concentrated in the March to June period, full economic recovery could take more than two years. Indeed, the Bank of Canada’s most recently published Monetary Policy Report (MPR) indicated that the decline in 2Q GDP could be as large as 30%, relative to output in 4Q19. Pre-crisis, the Canadian economy had been operating close to potential with the labour market performing well, with low unemployment and rising wages. Despite energy intensive regions facing challenges from low-investment and relatively elevated household debt, economic activity overall had been on solid footing. Now, the Canadian economy faces challenges in avoiding a second wave of cases once mobility restrictions are lifted and awaiting the rebound in global energy demand. Ultimately, the timing and strength of the recovery will depend heavily on how the pandemic unfolds and what measures are required to contain it. The recovery will also depend on how willing consumers are to return to public venues and how quickly businesses are willing to return previously furloughed workers.

Disclaimer

_{This report is provided to you for informational purposes only and is not intended to provide personal investment advice. This report does not include or constitute an investment recommendation and does not take into account the particular investment objectives, financial conditions, or specific needs of individual clients. Any statements regarding future prospects may not be realized. Before acting on this material, you should consider whether it is suitable for your particular circumstances and talk to your investment advisor. The author(s) of the report and the supervisors of the Global Portfolio Advisory Group may own securities of the companies included herein. Scotia Capital Inc. is what is referred to as an “integrated” investment firm since we provide a broad range of corporate finance, investment banking, institutional trading and retail client services and products. As a result we recognize that there are inherent conflicts of interest in our business since we often represent both sides to a transaction, namely the buyer and the seller. While we have policies and procedures in place to manage these conflicts, we also disclose certain conflicts to you so that you are aware of them. Please note that we may have, from time to time, relationships with the companies that are discussed in this report. The Global Portfolio Advisory Group prepared this report by analyzing information from various sources. Information obtained in the preparation of this report may have been obtained from the Equity Research and Fixed Income Research departments of the Global Banking and Markets division of Scotiabank. Information may be also obtained from the Foreign Exchange Research and Scotia Economics departments within Scotiabank. In addition to information obtained from members of the Scotiabank group, information may be obtained from the following third party sources: Standard & Poor’s, Morningstar, Bloomberg, Credit Suisse AG, Perimeter Markets Inc., and FactSet. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc., which includes the Global Portfolio Advisory Group, nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained herein are those of the Global Portfolio Advisory Group as of the date hereof and are subject to change without notice. For that reason, it cannot be guaranteed by The Bank of Nova Scotia or any of its subsidiaries, including Scotia Capital Inc. This report is not, and is not to be construed as: (i) an offer to sell or solicitation of an offer to buy securities and/or commodity futures contracts; (ii) an offer to transact business in any jurisdiction; or (iii) investment advice to any party. Products and services described herein are only available where they can be lawfully provided. Scotia Capital Inc. and its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent. Trademarks are the property of their respective owners. Copyright 2019 Scotia Capital Inc. All rights reserved. This report is distributed by Scotia Capital Inc., a subsidiary of The Bank of Nova Scotia. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.}