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Weekly Market Pulse - Week ending March 11, 2022

Market Developments

U.S. stock indices posted their worst weekly loss in nearly two months. Equities whipsawed during the week as the S&P 500 Index had its largest drop in a year on Monday, followed by a sharp swing higher on Wednesday. Talks between Russia and Ukraine to resolve the conflict and a four-decade high inflation print were key factors shaping market movements. Asian equities, particularly emerging markets, moved lower as risk-off sentiment took hold. European equities, on the other hand, delivered strong positive performance on hopes of a resolution to the conflict. However, this was after several weeks of negative performance, and they continue to trail other developed market equities year to date.  

Fixed income:

Yields were driven significantly higher by a more hawkish than expected stance by the European Central Bank, and amid mounting concerns around the intensity and persistence of higher inflation.


Oil prices cooled off after weeks of stellar positive performance. The fast-moving Russia-Ukraine conflict continues to affect energy markets. Copper fell as concerns about economic growth weighed on investors. 

Performance (price return)

Performance table

  As of March 11, 2022

Macro developments

Canada – Strong employment gains in February, especially in front -facing services sectors

Canadian employment rebounded strongly in February, amid widespread reopening in provinces as Omicron-related restrictions lifted. Total employment grew by 337K jobs during the month, above consensus estimates of a 127K increase. The food and accommodation sector added 114K jobs, while the recreation and culture sector added 73K jobs. Both sectors had seen sharp job losses in January, as pandemic concerns and restrictions were in full force. In February, the unemployment rate fell to 5.5%. Hourly wages rose 3.3% year over year.

U.S. – CPI surges higher to four-decade high; Consumer sentiment takes a hit, led by rising fuel prices and mounting inflation concerns

The U.S. Consumer Price Index (CPI) grew 7.9% year over year and 0.8% month over month in February. Core CPI, which excludes food and energy components, grew 6.4% year over year and 0.5% month over month. Energy, food, and rent prices all accelerated to multi-year highs. Food prices increased the highest since April 2020. The increase in energy prices accounted for approximately a third of the overall monthly increase, and shelter accounted for nearly 40%. Goods inflation is now spreading over to core services inflation. Upward pressure on food and commodity price inflation increased toward the end of the month on the back of the Russian invasion of Ukraine and the accompanying exacerbation in supply chain bottlenecks.

The University of Michigan consumer sentiment survey provided an early glimpse of how U.S. consumers are reacting to the Russia-Ukraine conflict. Sentiment was already low, and the preliminary release showed a sharp decline to 59.7, down from 62.8 in the previous month, and below estimates of 61. Consumers have severe concerns about higher inflation, exacerbated by rising fuel prices due to the Russia-Ukraine conflict. Year-ahead inflation expectations are at their highest levels since 1981.

International – China’s National People’s Congress outlines its plan for economic growth in 2022; China’s exports surges; Chinese CPI came in at a subdued level; German industrial production surges

China’s National People’s Congress held its annual session during the week. Main objectives included setting the economy on course for a steady expansion in 2022, prioritizing job creation, and increased social welfare. The government announced a target growth rate of “around 5.5 percent” for 2022. This goal is lower than the 8.1% growth of 2021 but is nonetheless considered a "stretch goal” that the country could achieve with big fiscal spending programs. The budget allocation to military spending increased by 7.1%. The plan suggested that the government was looking to keep economic growth as a key focus, above shifting the economic mix more toward domestic consumer spending.

Chinese year-to-date exports came in at 16.3% year over year, above median expectations of a 14.0% rise. Export growth moderated in January and February, after a 20.9% rise in December. This points to stable global demand but with multiple risks, especially on the geopolitical front, that are creating uncertainty in the outlook.

Chinese CPI increased 0.9% year over year and 0.6% month over month in February. This was the first month over month increase since November 2021. Moving forward, there are expected to be strong pressures on the upside, especially due to intensifying commodity prices because of the Russia-Ukraine conflict. The subdued inflation reading for February, however, may provide China’s central bank with more cover to further ease credit conditions.  

German industrial production surprised on the upside, growing 1.8% year over year and 2.7% month over month in January. The construction sector saw sharp growth of 10.1% month over month. Consumer goods production also ramped up 4.0% month over month.

The European Central Bank unexpectedly accelerated its winding down of monetary stimulus, even while keeping its main refinancing and deposit facility rates unchanged. The ECB signaled in strong terms that it was concerned about the record inflation, even more so than slowing economic growth, that has gripped the eurozone on the back of the Russia-Ukraine crisis. The ECB will slow its bond buying program from May 2022 with the goal to end it by September 2022. The institution also kept open the possibility of a rate hike in Q4/2022.

Quick look ahead

Canada – Manufacturing sales (March 15); CPI (March 16); Retail sales (March 18)

Manufacturing sales for January will be released and are expected to post an increase of 0.7% month over month, according to consensus estimates.

CPI is expected to come out at 0.9% month over month for February, mainly on gasoline prices rising during the month. The year over year reading would be expected to come in at 5.5%.

Retail sales for January are expected to have risen 2.4% month over month based on the preliminary estimate from StatsCan on the continued reopening of some services sectors.

U.S. – Empire manufacturing (March 15); Retail sales (March 16); FOMC rate decision (March 16); Industrial production (March 17)

The Empire State Manufacturing Survey will be the first reading into manufacturing activity for March. The survey is expected to show a rebound to 7.0 from 3.1 in February. As usual, supply chain and pricing indicators will be closely watched.

Retail sales are expected to increase 0.4% month over month in February, down sharply from the 3.8% increase in January. Main areas to watch will be if durable goods spending, previously an area of strength (especially in autos and furniture), shows any weakness. Also, spending in discretionary categories such as electronics and clothing have been showing recent weakness, and they will be closely watched. It will also be noteworthy to see the extent of greater services spending.

The Federal Open Market Committee (FOMC) will meet to discuss changes to the Fed Funds Rate. Markets are pricing in a 25-basis-point rate hike. Inflation is a strong concern, and the market will look to gauge the impact that the Russia-Ukraine crisis will have on the U.S. Federal Reserve’s long term inflation outlook. Recent indicators have amplified the concerns around inflation, with February flash purchasing managers’ index data showing a rebound in inflationary pressures for producers and confirming their desire to pass costs onto consumers. The Fed has the task of balancing out these inflationary pressures without tightening too sharply, which might put the economy into a tailspin.  

Industrial production should continue to gain in February. Consensus estimates are for a 0.5% month over month increase, a slight moderation from the 1.4% increase in January. Manufacturing continues to face capacity issues from material and labour shortages. It will be interesting to see if the Russia-Ukraine crisis amplified any shortages toward the end of the month.

International – German ZEW survey expectations (March 15); Japan’s core machine orders (March 16); Bank of England rate decision (March 17)

Germany’s ZEW survey is an important gauge of sentiment and economic expectations. The survey had been seeing near consistent improvement since November 2021. Market views, however, suggest a large decline to 5.0 from 54.3 in the previous month. This is being driven by concerns about the Russia-Ukraine crisis, and the impact it will have on the German economy given that country’s considerable energy and trade dependence on Russia.

Japanese core machine orders are expected to have declined 2.0% in January, after a strong 3.6% rise in December. Projected corporate weakness is prompting companies to delay capital expenditure plans.

The Bank of England will meet to set its official bank rate. Market expectations are for a second consecutive 25-bp hike to a rate of 75 bps. While growth concerns are present, the BoE has demonstrated its desire to tamp down on record inflation, with inflation considered a more pressing concern.

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This material is for informational purposes only. While this material has been compiled from sources believed to be reliable, Qtrade Investor does not guarantee the accuracy, completeness, timeliness or reliability of this information. Information, figures and charts are summarized for illustrative purposes only and are subject to change without notice. All investments are subject to risk, including the possible loss of principal.