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Traders set for quiet Christmas trading amid latest economic growth data

TORONTO - Stock markets are set to go into the year's second-last week of trading on an up note. And if past years are any indication it will be a quiet week for investors with the TSX closed both Christmas Day and Boxing Day while New York is shuttered just for Dec. 25.

"(There will be ) very low volume because a lot of people are obviously away; you have holidays so it’s typically a very slow period," said Bob Gorman, chief portfolio strategist at TD Waterhouse.

"What that can mean is, in the unlikely event you have significant news, the thin volume can exacerbate that movements to the up and down side but typically you don’t have much news either."

Traders have two significant tailwinds after the Federal Reserve last week ended months of speculation by announcing it will start to cut back on asset purchases by US$10 billion to US$75 billion a month.

The U.S. central bank also went out of its way to reassure markets, saying short-term rates aren't going up from near zero any time soon.

While there is some disappointment at seeing a diminishing of a stimulus program that has kept long-term rates low and underpinned a strong rally on equity markets, it is balanced to an extent by relief that the Fed deems the world's largest economy healthy enough to start unwinding the latest episode of quantitative easing.

That relief manifested itself in a string of gains last week, leaving the TSX up 2.1 per cent for the week while the Dow advanced 2.95 per cent. The showing left the Toronto market up 7.75 per cent for the year while the Dow has charged ahead 23.8 per cent.

Also boosting gains at the end of the week was data showing the U.S. economy grew at a solid 4.1 per cent annual rate from July through September, the fastest pace since late 2011 and significantly higher than the previous reading of 3.6 per cent.

Much of the upward revision came from stronger consumer spending.

This coming week, the dollar could find some lift from the latest reading on the Canadian economy. Statistics Canada is expected to report Monday that the gross domestic product grew by 0.1 per cent in October following a 0.3 per cent gain the previous month.

"Spinoffs tied to a bin-busting grain crop helped lift manufacturing shipments by a solid one per cent month over month," observed CIBC World Markets senior economist Peter Buchanan in a commentary.

"That sector was a heavy hitter in September and should contribute to growth again in October."

The loonie lost 0.47 of a cent US last week as the American currency strengthened in the wake of the Fed tapering announcement and the revised GDP number.

There is also top-drawer U.S. data for investors to consider this week, starting off on Monday with personal income and outlays for November.

CIBC believes higher consumer spending likely increased total expenditures by 0.5 per cent while wage growth should come in at 0.3 per cent.

Traders will also take in the latest reading on consumer confidence from the widely-watched University of Michigan index on Monday.

And U.S. durable goods orders are released on Tuesday. The consensus calls for orders to have risen by 1.8 per cent in November, following a 0.8 per cent rise the previous month.

The Canadian Press


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