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Weekly Market Pulse - Week ending March 19, 2021

Market developments


Equities sold off even as the U.S. Fed reaffirmed its stance of keeping interest rates low and its policy accommodative. The Fed expects GDP growth and unemployment to recover at a faster pace this year, raising concerns over inflation even as the central bank said inflation pressures are expected to be “transient.” The S&P 500 fell 0.77%. The S&P/TSX Composite was unchanged.

Fixed income:

Yields continue to rise on high economic expectations. The U.S. Treasury 10-year yield rose 10 basis points to 1.72%. The Government of Canada 10-year yield was unchanged at 1.59%.


Oil prices fell 6.39% on concern over weakening demand. Rising COVID-19 cases in Europe have become a main concern, but there are also hints of demand weakness in Asia. Gold prices rose 1.05% as the Fed reiterated its commitment to keep rates low. Copper prices were broadly unchanged.

Performance (price return)

Performance - Price return

As of March 19, 2021

Macro developments

Canada – Retail sales decline; Manufacturing sales increase; CPI rises

Retail sales fell 1.1% seasonally adjusted in January, following the 3.7% decline in December. The reading fared better compared to the preliminary estimate for a decline of 3.3%. The decline could be attributed to non-essential retailers who were mandated to close. Clothing sales dropped 17.8%, furniture sales declined 15.5%, and sporting goods, hobby, book and music sales fell 16.8%. StatsCan estimates that retail sales rose 4.0% in February.

Manufacturing sales rose 3.1% in January, following the 1.3% increase in December. The gain was driven by the 22.4% gain in computer and electronics and 9.1% growth in wood products. Motor vehicle sales fell 8.2% on a shortage of semiconductor chips.

CPI increased 0.5% in February, following the 0.6% rise in January. The gain was led by gasoline prices, which rose 6.5%. The prices of goods rose 1.1% in the month, while services only saw a 0.1% gain. On a year-over-year basis, CPI has risen 1.1%.

U.S. – Fed revises 2021 economic projections; Empire Manufacturing activity rises; Retail sales decline on cold weather

The Fed left policy unchanged. The focus was on economic projections which were revised upwards, with notable improvements to GDP growth, unemployment rate, and PCE inflation for the year. These revisions carried over to the interest rate dot plot, with more participants expecting hikes in 2022 and 2023, though the median projection remains unchanged at 0%. Inflation projections for the year increased, but Chairman Jerome Powell continues to reiterate the Fed’s view that the increase will be “transient” and will not be counted as progress toward the long-term inflation goal. When asked about tapering, Powell said that it was not time to think about it yet, and the Fed would need to see actual data to confirm its goals are on track. Powell also remains unconcerned on the move in bond yields in recent weeks, and reiterated that he would only be concerned by disorderly conditions or a persistent tightening.

The Empire Manufacturing General Business Conditions Index rose to 17.4 in March from 12.1 in February. Manufacturing activity continues to improve in New York state. Firms reported new orders and shipments increasing, and employment indicators also point toward modest gains. The prices paid index rose to its highest level in a decade, indicating rising cost pressures.

Retail sales fell 3.0% in February, following the revised 7.6% increase in January. The decline was broad-based, attributed to the colder-than-usual weather. The only retailers where sales increased were gasoline stations.

International – Bank of England leaves policy unchanged; Bank of Japan increases monetary flexibility; China retail sales and industrial production rise; Germany ZEW increases

The Bank of England left rates and quantitative easing policy unchanged and reiterated that policy would not be tightened until there is clear evidence of a recovery. Similar to the Fed, they were not bothered about the recent rise in yields, stating that overall financial conditions were broadly unchanged.

The Bank of Japan released findings from a review of its framework. Overall, rates were unchanged, while the BoJ tweaked its policy to increase its flexibility. The target yield of the 10-year bond was stated to be in a ±0.25% band around the current 0% target, compared to the previous implied range of ±0.20%. The central bank also removed its commitment to buy exchange-traded funds at an annual pace of 6T yen, but also increased its upper purchase limit to 12T yen, allowing it to provide support as needed.

China retail sales rose 33.8% YTD compared to the same period last year. The strong reading is skewed by the low base in 2020, but also highlights strong demand. Gains were led by discretionary sectors including jewelry, automobiles, and restaurants and catering.

Similarly, China industrial production rose 35.1% YTD compared to the same period last year. The increase was led by manufacturing where output rose 39.5%.

The Germany ZEW Indicator of Economic Sentiment Index rose to 76.6 in March from 71.2 in February. Optimism continued to rise as experts predicted a broad recovery of Germany on high expectations for the vaccine. By contrast, the ZEW Indicator of Current Economic Situation remains depressed at -61.0, compared to -67.2 in the prior month.

Quick look ahead

Canada – CFIB Business Barometer (March 25)

A quiet week in Canada with just the March update on small business sentiment.

U.S. – Durable goods orders and Markit PMIs (March 24); Personal income and spending (March 26)

Durable goods orders are expected to have held up in February as the economy reopens. The report may also show more evidence of semiconductor shortages. Following that, there will be an updated iteration of the PMI reports for March which will provide insight on the activity of businesses.

Lastly, personal income and spending data for February will be released. Incomes are expected to drop 7.0%, as the January reading will have received a one-time boost from the US$600 stimulus cheques. Spending is also likely to post a decline, reflecting the lower incomes, which could also have been affected by the cold weather.

International – Japan PMI (March 23); Eurozone PMI (March 24); ifo Business Climate survey (March 26)

Internationally, we have a variety of surveys that will provide insight into how firms are faring, particularly in Europe where virus cases are rising amid a sluggish vaccine rollout.

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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.