For the week of November 14 – 18
Markets continued to surge on Friday after a surprise recovery on Thursday. Treasury yields continued upward, with five year yields in Canada up by an additional four basis points as investors sold their safe-haven assets. Yields are also rising this morning, with the five year yield up an additional 12 basis points. Approximately $1.2 trillion was taken off the value of bonds worldwide and approximately $1 trillion was added to the value of equities. Investors expect that an increase in fiscal stimulus proposed by Donald Trump will help stimulate an uptick in the U.S. economy. Metal prices continued to rise as prospects of increased future infrastructure spending signaled a potential increase in demand. The U.S. dollar has also gained strength over the past week.
The implied probability of a rate hike by the Fed in December remains relatively flat compared to pre-election levels, at 84 percent. Members of the Fed have made statements assuring that the central bank is independent from any political pressures. The Fed’s James Bullard stated on Thursday that current levels of volatility should not sway the Fed on their current path.
Gross domestic product expanded by an annualized 2.2% in the third quarter, much higher than the expected 0.8%. Much of this unexpected growth was led by a 0.5% increase in net exports for the country. This result will take some pressure off of the Bank of Japan, who will be less inclined to add additional monetary stimulus.
Oil prices fell Friday as the International Energy Administration expressed concerns of continued supply growth if OPEC is unable to cut production at the end of November. Oil prices are currently down by 1.38%. The Canadian dollar is trading relatively flat against the U.S. dollar this morning. Today’s expected range is 1.3505 – 1.3605.
It will be a relatively quiet week for data in Canada, with the only notable release coming from Manufacturing Sales, which is expected on Wednesday. The U.S. will see a bit more data action with releases expected for University of Michigan Sentiment, Empire Manufacturing, Retail Sales, Industrial Production, Housing Starts, and Consumer Prices.