Nov 7, 2012 / 5:00 am
Stocks jump on positive economic data following lacklustre reopening
Global equity markets jumped back to life Thursday after being subdued most of the week following a two-day shutdown on Wall Street due to the giant storm that swept across the Northeast.
A string of positive economic data released south of the border was the catalyst with a positive U.S. October ISM reading getting things going. ISM numbers showed a manufacturing sector in expansion last month while a separate report on U.S. consumer confidence further boosted optimism as it rose to its highest level since early 2008. Spending on construction projects also rose in September as home building increased according to the Commerce Department. Meantime, weekly jobless claims came in lower than expected just as a report from ADP showed positive private sector job creation in October. The strength of the U.S. economic reports took the spotlight off U.S. earnings for the time being which continue to show generally declining revenues across corporate America. A lack of surprises out of Europe added to the buoyant mood as did Chinese manufacturing activity, which moved higher in October suggesting modest improvement in the world’s number two economy.
Next up for market watchers was the U.S. monthly unemployment report released today which remained stuck at 7.9% despite a significant increase in the non-farm payroll numbers. It’s followed by the U.S. presidential election November 6th and the start of the once-in-a-decade transfer of power in China November 8th.
TSX notches positive month, U.S. indexes fall
The month of October was a positive one for the TSX which rose 13 pts. or .11%. In comparison, major U.S. stock benchmarks ended the period in the red. The Dow fell 389 pts. or 2.89%, the S&P 500 fell 34 pts. or 2.42% and the Nasdaq shed 139 pts. leaving it down 4.49% for October.
The TSX also outdid its U.S. counterparts so far this week. Canada’s benchmark index rose 199 pts. to 12,499 over the four-day period reaching its highest point in eight months. In the same period (shortened by the impact of Sandy), the Dow added 125 pts. to finish Thursday at 13,232, the S&P 500 rose 16 pts. to close at 1,427 and the Nasdaq tacked on 33 pts. to end at 3,020.
Data supports adding to equities
- Equities. Steve Uzielli, Director, Portfolio Advisory Group (PAG) wrote: “Our current investment thesis anticipates a bottoming of economic growth in China and continued improvement in the U.S. housing and labour markets, all of which will serve to heighten consumer confidence and enhance the cyclical recovery.”
- Fixed income. Andrew Mystic, Associate Director, PAG, highlights the following recommendations: “Term Call – given the recent decline in yields, we no longer see value in the mid-to-long end of the curve and recommend investors stay short at this time. Sector Call – underweight Canada, overweight Municipals, Provincials and Corporates. Currency Call – we recommend Canadian investors remain in Canadian dollars for their fixed income holdings. Alternative Strategies – new call – marketweight high yield, marketweight Emerging Markets Debt, underweight inflation protected debt.”
- Portfolio strategy. Scotiabank GBM Portfolio Strategist Vincent Delisle is: “sticking with equity over bond/cyclicals over defensives preference. Macro visibility has been improving since August, leading indicators are recovering, and the pick-up in global purchasing manager surveys (PMI and ISM indices) could extend into Q1/13.”
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