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Weekly Market Pulse - Week ending March 4, 2022

Market Developments


Uncertainty loomed over markets as the Russian invasion of Ukraine continued to escalate. The SWIFT network was cut off for major Russian banks, and Russia’s central bank saw its assets frozen. Of note, energy payments have been excluded from these sanctions. Markets are gauging the risk of higher commodity prices, which could stifle consumer spending and could further spur inflation. North American equity markets held up better during the uncertainty, while European markets took the brunt of the selloff due to their proximity and reliance on Russian energy.

Fixed income:

Yields fell sharply as Russian forces pushed onwards. The Bank of Canada hiked rates 25 basis points to 0.5%, noting that “the situation remains fluid.”


Commodity prices surged amid the uncertainty and ongoing armed conflict. The Russia-Ukraine region is a major exporter of many commodities, two of the largest being oil, which surged over 25%, and wheat, which surged nearly 60%. Other commodities also benefitted as reserves are being built up across the board on supply uncertainties. 

Performance (price return)

Performance table

  As of March 4, 2022

Macro developments

Canada – Bank of Canada hikes 25 basis points; GDP unchanged in December

The Bank of Canada increased interest rates by 25 bps to 0.50%. Stronger-than-expected recent economic growth has confirmed that economic slack has been mostly absorbed. Even as the Canadian labour recovery was hampered by Omicron early this year, the rebound appears to be taking place with spending proving resilient. On the other hand, the BoC conceded that inflation was “more pervasive” as measures of core inflation have all risen, with the invasion of Ukraine adding to pressures on energy and food commodities. Inflation is now expected to be higher in the near term than previously projected in January. Although the Russia-Ukraine conflict has added a major new source of uncertainty, “the situation remains fluid” and is being closely watched by the BoC. There was no press conference following the release, but at a CFA Society Toronto speech, Governor Tiff Macklem said “it is important to underline that the Bank’s policy interest rate remains the most important monetary policy tool at our disposal to return inflation to the 2% target,” indicating more hikes will come later this year.

Canadian real GDP was unchanged for December. The services sector managed to expand 0.1% despite the spread of the Omicron variant and governments reintroducing some restrictions. Retail trade (-2.7%), arts, entertainment and recreation (-3.7%), and accommodation and food services (-1.5%) were hit hardest given their consumer-facing nature. Goods-producers declined 0.1% on mining, quarrying, and oil extraction on production disruptions over cold weather. Overall, Canadian GDP grew 1.6% in the fourth quarter and 4.6% for the year. In 2021, the Canadian economy gained on strong consumer spending, government spending, and business investment.

U.S. – Powell backs rate hike at U.S. Federal Reserve testimony; Fed Beige Book shows economy expanding despite headwinds; Nonfarm payrolls beat expectations

U.S. Federal Reserve Chairman Jerome Powell spoke before the House Financial Services Committee, stating that “with inflation well above 2% and a strong labour market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month.” Powell said the Fed will get inflation back under control, and that the central bank is prepared to move more aggressively than 25 bps if required. The economy remains resilient, inflation is elevated, and the labour market is tight, setting the stage for the Fed to raise rates. Inflation is expected to cool as the year progresses, as waning fiscal policy flows through and interest rates rise. The ongoing Russian invasion is being closely watched, but Powell generally steered away from questions surrounding the conflict, including the sanctions as those fall under the jurisdiction of the U.S. government. However, Powell said that the effects are uncertain but growth could be hampered as higher energy prices flow through the economy.

The Fed Beige Book noted that economic activity continued to expand at a modest pace even as COVID cases disrupted business and firms faced heightened absenteeism. Other disruptions noted were severe winter weather, ongoing supply chain issues, and low inventories. Labour markets continued to grow in the meantime at a solid pace on widespread demand, hampered by worker scarcity issues, and prices continued to gain across the nation on higher input and transportation costs.

Nonfarm payrolls rose by 678K jobs in February, strongly beating market expectations of 400K. Services employment rose 549K with gains widespread. Goods employment on the other hand rose 105K, led by construction and manufacturing. The unemployment rate fell 0.2% to 3.8%.

International – South Korean exports surge; China’s PMI unchanged; Eurozone CPI soars

South Korean exports rose 20.6% year-over-year in February. By product, steel surged 40.1%, petrochemicals rose 66.2%, computers increased 44.5%, and semiconductors gained 24.0%.

The Caixin General Composite Purchasing Manager’s Index was unchanged at 50.1 in February. The Manufacturing PMI rose to 50.4 from 49.1, while the Services PMI declined to 50.2 from 51.4. Manufacturers noted a small improvement as output and sales rose. However, export demand came in weaker and employment declined. Services activity slowed on a decline in new business and employment. Input and output prices continued to rise.

The eurozone’s consumer price index rose 0.9% in February. Energy prices rose 3.3% in the month, food prices increased 0.8%, industrial goods gained 0.7%, and services increased 0.4%. On a year-over-year basis, prices rose 5.8%.

Quick look ahead

Canada – Labour force survey (March 11)

Canadian employment should have rebounded in February, following losses in January on COVID restrictions. As such, the gains should be concentrated within services. Markets are expecting a rebound of 125K for the month, following the 200K loss in January.

U.S. – CPI (March 10); University of Michigan consumer sentiment survey (March 11)

The main release to watch this week is the CPI reading for February. Inflationary pressures continue to intensify, and prices could have risen another 0.9% during the month. Higher commodity prices will once again contribute, and the Russia-Ukraine conflict could further add to the pressures. Shelter prices, which make up a third of the index, could further rise as they have lagged rising housing prices.

The University of Michigan consumer sentiment survey will provide an early glimpse of how consumers are reacting to the Russia-Ukraine conflict. Sentiment is already low, and could further decline as consumers look to pull back spending to save amid the uncertainty. Inflationary fears could also rise further given elevated energy prices.

International – China’s National People’s Congress; China’s exports (March 7); Chinese CPI and German industrial production (March 8); ECB meeting (March 10)

China’s National People’s Congress will hold its annual session. Investors will be keen to see China’s goals for the year amid a slowing economy, hampered by regulatory reforms and housing slowdowns. Markets will watch for fiscal policies, virus restrictions and responses, growth targets, and Russia-Ukraine comments.

Chinese exports should continue to be strong but there are indications of exports moderating. YTD February exports are expected to come down to a solid 15.7% year over year.

Chinese CPI is expected come out at 0.8% year over year in February. There is the potential for a surprise on higher energy and food costs.

German industrial production is expected to have rebounded 0.5% in January. The production shortfall has largely reflected the supply constraints, which could have eased.

Lastly and most importantly, we have the European Central Bank meeting. President Christine Lagarde had previously set up a path for the central bank to start tightening policy. However, the most recent developments with respect to Russia-Ukraine could lead the ECB to take a more accommodative stance. The ECB will have a new round of economic projections, and markets will be keen to see the 2024 inflation reading, which could be around 2%.

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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.