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Weekly Market Pulse - Week ending October 29, 2021

Market developments


Market pushed higher on a slew of solid earnings with over half of S&P 500 companies having now reported. Positive earnings surprises were reported across multiple sectors. Equities rose despite concerns of supply chain issues and labour shortages seeping into growth, with Apple and Amazon two notable companies identifying the issue.

Fixed income:

Domestic yields rose sharply following the Bank of Canada meeting, indicating that economic slack is expected to be absorbed mid-2022. Shorter-term yields rose even higher as markets priced in an earlier hike. Yields in the U.S. retreated ahead of the Fed meeting this week.


Energy prices took a breather this week. Crude prices topped US$85 a barrel for the first time since 2014, but came back down on a strong U.S. inventory gain. Copper prices declined further on slowing growth concerns stemming from high inflation and energy shortages, which could see factories scale back production.

Performance (price return)

Performance table

  As of October 29, 2021

Macro developments

Canada – Bank of Canada announces the end of quantitative easing; GDP rises on services

The Bank of Canada announced the end of its quantitative easing program and is moving into the reinvestment phase, where further purchases of bonds will solely be to replace maturing bonds. Growth and inflation have both been impacted by supply chain disruptions. Growth was revised down to 5.1% for the year from 6.0%. Demand has been strong as consumer consumption has returned, but shortages of inputs and transportation bottlenecks are limiting capacity. Inflation was revised up to 3.4% for 2021 and 2022, from 3.0% and 2.4% respectively. Although recent increases to inflation were anticipated, high energy prices and supply bottlenecks now appear to be stronger and more persistent. Nonetheless, the intensifying supply chain bottlenecks are expected to ease and the central bank says it expects that economic slack will be absorbed sometime in the middle quarters of 2022. Short-term yields rose sharply as markets began to price in an earlier hike.

Real GDP rose 0.4% in August on a broad recovery in services. Services output rose 0.6%, with solid increases in accommodation and food services (+7.0%), retail trade (+1.8%), and transportation and warehousing (+1.2%). The output of goods declined 0.1%. The agriculture, forestry, fishing and hunting sector dropped 5.7% on extreme heat conditions in western Canada, while demand for utilities rose 1.5% on cooling. StatsCan estimates that GDP was unchanged for September, which if accurate would mean Q3 GDP rose 0.5%.

U.S. – Conference Board consumer confidence ticks higher; GDP rises but is dragged by goods; Personal income declines while spending rises

The Conference Board Consumer Confidence Index rose to 113.8 in October, from 109.8 in September. Consumer confidence ticked up slightly following three months of declines. Concerns about the Delta variant eased, and nearly half of respondents indicated their intention to take a vacation within the next 6 months, the highest level since the onset of the pandemic. Meanwhile, short-term inflation expectations rose to a 13-year high.

Real GDP rose 2.0% annualized in Q3, falling short of expectations of 2.6%. Personal consumption rose just 1.6% on a 7.9% increase in services, while spending on goods dropped 9.2%. The production of motor vehicles was significantly hampered by the semiconductor shortage, forcing firms to scale back. Investments rose 11.7% on strong business investment. Private inventories, which were a significant drag in the Q2 reading, also saw a strong increase, adding 2.1% to the overall reading. Government consumption was muted, rising 0.8%, and net exports dragged.

Personal incomes declined 1.0% in September primarily on a decrease of government social benefits, including unemployment benefits. Personal spending rose 0.6%. Services spending rose in health care and food services and accommodation. Goods spending rose in food and beverages, offset by a decrease in motor vehicles.

International – Germany ifo sentiment falls; ECB talks inflation; Bank of Japan scales back forecasts; Eurozone GDP rises and inflation accelerates

The Germany ifo Business Climate Index fell to 97.7 in October, from 98.9 in September. Overall, companies are less positive on their current situations due to ongoing supply problems. In manufacturing, capacity saw a decline and expectations are becoming cloudy. In the service and trade sectors, expectations were more pessimistic. The construction sector was the only sector to see their situation improve slightly.

The European Central Bank left interest rates and its bond purchases program as is. The current phase of higher inflation is expected to last longer than first thought and is predicted to slow as the current supply dynamics ease in 2022. ECB President Christine Lagarde said she expects the Pandemic Emergency Purchase Programme to conclude as planned in March 2022. However, the interest lift-off looks to be a bit farther out. Lagarde spelled out three elements which all have to do with inflation: inflation reaching the 2% target ahead of the projection period; inflation remaining durably above 2% for the rest of the projection period; and sufficient realized progress that underlying inflation would stabilize at 2% over the medium term. The ECB inflation projections in September saw inflation at 2.2% for the year, following by 1.7% in 2022 and 1.5% in 2023. Further discussions surrounding asset purchases will be discussed and reassessed at the December meeting.

The Bank of Japan kept policy steady and saw more delays in the post-pandemic recovery, noting the downward pressure on consumption and production due to supply side constraints. The bank’s 2021 GDP forecast was cut to 3.4% from 3.8% in July. CPI, excluding fresh food, is expected to come in flat at 0%, compared to 0.6% previously.

Euro area GDP rose 2.2% seasonally adjusted in Q3, led by France (+3.0%) and Italy (+2.6%). German GDP came under expectations, likely due its high concentration in manufacturing and the lack of supplies.

Euro area CPI accelerated to 4.1% year over year in October from 3.4% in September. Prices in the month surged 0.8% on higher energy prices (+5.5%) and industrial goods (+0.8%). Core CPI, excluding food and energy, rose just 0.3% in October, or 2.1% year over year.

Quick look ahead

Canada – Manufacturing PMI (November 1); Labour force survey (November 5)

The month kicks off with Canada’s Markit Manufacturing PMI for October. The manufacturing sector should continue to hold strong, with the usual indications of supply chain disruptions and labour shortages.

Employment for October is expected to come out sluggish. Although employment is expected to have continued to gain, the pace is expected to slow to 35K according to market consensus, from 157K last month.

U.S. – Fed meeting (November 3); Nonfarm payrolls (November 5)

There are expectations for a formal tapering announcement from the U.S. Federal Reserve. The Fed had laid out an initial plan to taper by US$15B a month, which would conclude around June 2022. Any talk surrounding inflation will also be closely watched, as central banks globally have become increasingly concerned on higher inflation due to strains in supply chains.

Employment will also be closely watched. Markets are hopeful that job growth has finally picked up in October as the Delta variant retreats following a couple of disappointing months. Markets are forecasting an increase of 450K.

International – China PMI (November 2); Bank of England (November 4); Germany industrial production (November 5)

Chinese PMI numbers for October are likely to remain relatively unchanged. The manufacturing sector remains sluggish and the non-manufacturing sectors could have slowed.

South Korea trade has held strong this year and should have remained so for October. Semiconductor shipments could continue to post robust gains given the strong demand.

The Bank of England will be watched as the talk around hiking has heated up recently. Market consensus is for interest rates to stay on hold, but there is the risk of a rate hike. As with other central banks, inflation will be of interest as it may help lay out timing expectations of hikes.

German industrial production is expected to show a partial rebound of 1.0% in September, following the 4.0% decline in August mainly due to car production. Ongoing supply constraints means that there was likely limited improvement. 

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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.