Market Watch – Feb. 22, 2019
Big Picture
Markets
Looking Past Negative Trade Data for Now
Markets continue to cling to hopes for a 2019 rally that’s been fueled largely by optimism over U.S.-China trade negotiations and a more patient stance from the Fed. On Wednesday, global stocks started higher with an Asian rally that pushed the MSCI World Index to its highest since October after President Trump cited progress in ongoing trade talks. However, the latest economic data will be hard for investors to ignore. Japan and eurozone manufacturing sectors are pulling back, with preliminary February data showing factory activity in Japan at a 32-month low and the eurozone at a 68-month low. South Korean trade figures released Thursday show exports and imports fell sharply – the most since mid-2016, with exports to China tumbling 13.6%. Korea’s weakness is significant, given its position at the center of many international supply chains. In North America, U.S. markets closed lower Thursday following a Commerce Department report indicating weaker-than expected durable goods orders, declining home sales and a surprise drop-off in new orders for key U.S.-made capital goods. On Bay Street, the TSX also finished lower as gold prices slid and crude prices pulled back from recent highs. On Wednesday, crude prices had risen to 2019 highs helped by supply cuts from top producers, as well as U.S. sanctions on Iran and Venezuela. Finally, despite a fairly strong showing for the loonie so far in 2019, some analysts are predicting a slide down to the 71-cent mark over the next five years. It’s suggested a weaker loonie is needed to boost Canada’s export economy and take pressure off consumer spending and housing, which has largely shouldered the burden for recent economic growth.