Equity markets rebounded yesterday

Posted: Tuesday, February 13, 2018 - 08:58 EST

Equity markets rebounded yesterday and calm returned to both fixed income and stocks following a volatile last week.  There were several central bank speakers this morning with ECB President Draghi indicating that Euro area employment is higher than ever as the economy continues to improve.  Despite EU growth expected to come in at 2.4% for 2017, Draghi noted that strong employment and economic data does conceal some underlying risks – more specifically, the quality of the jobs needs to be improved.  In the U.S. Cleveland Fed President Mester’s view on the economy is that tax cuts will add to growth and could be an upside risk.  Similar to other central bank members, Mester feels that the recent market turmoil has not changed her economic outlook as economic fundamentals are still very sound.  She expects inflation to rise gradually to 2% over the next 1-2 years and further Fed rate hikes will be needed this year and next.

Hydro One reported earnings this morning that saw increases to both the transmission and distribution segments as a result of the colder winter season experienced in December.  The OEB also increased deemed ROE for 2018 to 9% from 8.78% which is a positive.  Most of the focus moving forward will be on the Avista acquisition, following FERC approval of the U.S. utility.  In regards to Canadian corporate credit markets yesterday, the tone was positive with spreads stabilizing.  The new issue market remains quiet during this period of volatility with spreads mostly unchanged to end the day.

Equity Markets:

 

  Index Level % Change QTD YTD Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017
S&P 500 2,656.00 1.39% -0.47% -0.47% 3.85% 3.82% 6.07% 3.09% 4.48% 6.64%
TSX

15,241.88

1.38% -5.78%

-5.78%

5.45% 4.53% 2.41% -1.64% 3.68% 4.44%

Rates:

 

Today

% Change

QTD change

YTD change

Sept 30 2016

Dec 31 2016

Mar 31 2016

June 30 2017

Sept 30  2017

Dec 31  2017

Canada 5 Year

2.058%

-0.02% 0.19% 0.19% 0.615% 1.150% 1.119% 1.393% 1.753% 1.866%
Canada 10 Year 2.328% -0.02% 0.28% 0.28% 0.990% 1.750% 1.625% 1.762% 2.099% 2.045%
Canada 30 Year 2.480% -0.02% 0.21% 0.21% 1.658% 2.350% 2.302% 2.148% 2.472% 2.266%
30yr Generic Corporate A rated Spread 1.210% 0.00% 0.00% 0.00% 1.530% 1.390% 1.330% 1.210% 1.240% 1.210%
30yr All-in Corporate A rated Yield

3.690%

-0.02% 0.21% 0.21% 3.188% 3.740% 3.632% 3.358% 3.712% 3.476%
US 10 Year 2.832% -0.03% 0.43% 0.43% 1.60% 2.50% 2.39% 2.31% 2.33% 2.41%
CDX IG 59.699 3.768                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.