Weekly Market Pulse - Week ending July 2, 2021

Market developments


U.S. stocks continued their rise last week with both the S&P 500 Index and the NASDAQ Composite Index notching gains and ending the week at all-time highs. A strong jobs report in the U.S. bolstered confidence in the economic rebound. Even as hiring came in stronger, payrolls are still down by approximately 6.8 million jobs relative to pre-pandemic levels. This supported a just-right “Goldilocks” scenario, in which the U.S. Federal Reserve will keep interest rates low while a lagging employment recovery is expected to prevent the broader economy from overheating.

Fixed income:

Bond yields decreased despite the strong job numbers. The U.S. Treasury 10-year yield dropped 10 basis points to 1.42%, and the Government of Canada 10-year yield dropped eight basis points to 1.37%.


Oil continued its rise, with West Texas Intermediate crude futures topping US$75 a barrel for the first time since October 2018. The OPEC+ coalition struggled to agree on a deal, but the current proposal of a slow resumption of output could further bolster bullish sentiment as fuel demand rebounds from the pandemic.

Performance (price return)

Performance - Price return

As of July 2, 2021

Macro developments

Canada – GDP falls; Markit PMI moderates; Product and raw material prices rise

Gross domestic product fell 0.3% month over month in April, beating consensus expectations of a fall of 0.8%. The drop was in line with expectations as provincial and federal restrictions tightened to contain the COVID-19 spread. The goods-producing sector grew 0.5% during the month, while the services-producing sector dropped 0.6%. Statistics Canada estimates that GDP fell a further 0.3% in May based on preliminary data, as lockdowns continued into the month.

The IHS Markit Canada Manufacturing Purchasing Managers’ Index fell to 56.5 in June, from 57.0 in May. Output and new order growth moderated in June. However, rising demand saw firms increase employment for the 12th consecutive month. Despite this hiring, however, backlogs rose, with the increases linked to continued deterioration in vendor performance and a shortage of raw materials, factors that also exerted upward cost pressures. Nonetheless, optimism was widespread regarding growth prospects for the year ahead.

Canadian industrial product prices rose 2.7% month over month in May, below expectations of an increase of 3.1%. Prices of manufactured products rose, with lumber the largest contributor and motor and recreational vehicles the most significant detractor. The Raw Material Price Index (RMPI) rose 3.2%, above expectations of a 2.0% increase with prices of metal ores, concentrates, and scraps driving the increase. On a year-over-year basis, prices paid by manufacturers rose 40.1%, as measured by the RMPI.

U.S. – Nonfarm payrolls increase; Conference Board consumer confidence rises; factory orders increase

Nonfarm payrolls rose by approximately 850,000 jobs in June, following an increase of 559,000 in May. The reading came above expectations of 720,000, and was the highest increase in 10 months, driven by strength in the leisure and hospitality sector. Other areas with notable increases were education, professional services, and retail trade.

The Conference Board Consumer Confidence Index rose 7.3 points in June to 127.3. This boost in confidence was in part driven by an improved assessment of labour conditions during the month. The share of households seeing “jobs plentiful” increased to 54.4% from 48.5%, while those seeing “jobs hard to get” decreased to 10.9% from 11.6%.

Factory orders rose 1.7% in May. The increase was driven by the transportation sector, thanks to an 88.4% increase in ships and boats. Excluding transportation, orders rose just 0.7%.

International – China PMI falls; Eurozone CPI increases; South Korean exports rise

China’s official Composite PMI fell to 52.9 in June, from 54.2 in May. The manufacturing PMI inched down to 50.9 in June from 51.0 in May. This was driven by a spike in COVID-19 cases and local lockdowns in the Guangdong province, a manufacturing and export powerhouse. In addition, higher commodity prices, supply shortages, and an inability of producers to pass rising prices on to domestic consumers have been compressing profit margins, causing a further slowdown in factory production. Non-manufacturing PMI decelerated to 53.5 in June from 55.2 in May. The services sector fell with local lockdowns, while construction held strong.

Eurozone CPI rose 0.3% in June, driven by a 1.2% increase in energy prices. On a year-over-year basis CPI grew 1.9%, in line with expectations. Core CPI, excluding energy and food, rose just 0.9% year-over-year.

South Korea’s exports rose 39.7% year over year in June, above expectations of a 33.8% increase. Semiconductor shipments increased by more than a third and separate data showed a further acceleration in factory activity and growing optimism among manufacturers. South Korea’s exports are seen as a barometer of international demand as the country manufactures essential items such as chips, displays, and refined oil for the world economy.

Quick look ahead

Canada – Bank of Canada Business Outlook Survey (July 5); Labour Force Survey (July 9)

The Bank of Canada will release its second-quarter Business Outlook Survey, expected to reflect a more upbeat sentiment on a broadening recovery now also benefitting services. Plans to hire and increase investment spending were rising in the bank’s first-quarter report and could see further increases on a better outlook.

Employment numbers are expected to show an increase for June given loosening restrictions across the country during that month. Market consensus is for job creation of approximately 195,000. This potential rise would come on a back of a weak May jobs report, which saw a net loss of 68,000 jobs.

U.S. – FOMC minutes and JOLTS job openings (July 7)

Minutes from the Federal Open Market Committee meeting on June 15–16 are expected to provide more insight into the relatively hawkish sentiments the FOMC has expressed. Of note, analysis will depend on the intensity of labour market gains the committee expects in the coming months, as well as a gauge of whether higher inflation is becoming a baseline expectation rather than an upside risk.

Job openings, typically seen as a leading indicator of employment growth, are expected to remain strong in May. Job openings in April had surged to a record high as businesses reported a shortage of qualified workers, even while offering record high compensation. Consensus expectations estimate May job openings to come in at 9.3 million jobs.

International – Germany’s ZEW Survey (July 6); German industrial production (July 7); ECB minutes (July 8); U.K. GDP and China’s CPI (July 9)

Germany’s ZEW survey, which captures the opinions of financial professionals, should exhibit some improvement as vaccinations have enabled the economy to reopen.

German industrial production is forecasted to have risen 0.7% in May, following a disappointing reading in April. Factory output should have increased given a broader global reopening, though car production concerns could hold back the reading.

The European Central Bank has held its policy steady and continued its accelerated pace of asset purchase. However, given more upbeat economic forecasts, its meeting minutes will be analyzed for hints on tapering going forward.

U.K. monthly GDP is expected to have grown 2% in May, on the back of 2.1% and 2.3% growth in March and April, respectively. The country continues to move towards its pre-pandemic economic output levels as indoor hospitality and recreation sectors were opened in England and consumers took advantage of more opportunities to spend.

In Asia, China’s consumer price index is expected to hold at 1.3% year over year in June. Higher prices on non-food items are expected to be partially offset by lower food prices, especially wholesale pork prices which are down 49% year over year. Higher material prices may have lifted consumer goods prices to a limited extent.

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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.