Market update

Another highly volatile week for global markets with continued geopolitical tensions as well as mixed earnings announcements and guidance throughout the week.

The TSX was the least impacted of North American markets with the continued resilience in oil prices – WTI posted gains of 3.5% throughout the week after it weakened again on Friday.

The impact of inflation on the earnings on growth/tech stocks was noticeable as numerous companies posted on forecast or below forecast earnings throughout the week with Amazon being the biggest loser catastrophically missing earnings due to their investment in EV manufacturer Rivian – this was Amazon’s first quarterly loss in 7 years.

It wasn’t all bad news with Visa and Microsoft outperforming their earnings forecasts.

European stocks began to turn around by week’s end boosted by earnings guidance from companies across the region

Asian markets also began to recover as the Bank of Japan reinforced low interest rate policy and the Chinese central bank promised market support.

Gold continued slide in April with major global currencies rallying – USD gained 4.6% in April. Gold gained slightly on Friday with added market volatility.

Weekly change: TSX: -2.0% ; DOW: -2.5%; S&P 500: -3.3%; NASDAQ: -3.9%; GOLD: -1.2%

Bloomberg Market Updates - https://www.bnnbloomberg.ca/markets

Schwab Market Updates Podcasts - https://www.schwab.com/resource-center/insights/section/schwab-market-update

RBC GAM Macro Memo – April 26 – May 9 What are the risks of recession? An expert weighs in

Eric Lascelles, Chief Economist of RBC Global Asset Management flags recession risk for North America to around 30% over the next 12 months.

The probability is three to four times higher than usual, but it must be emphasized that continued economic expansion is the most likely outcome for the coming year.

Lascelles however does indicate the risk of recession at some point over the next two years may well be above 50%, and potentially by a significant margin.

Why so high? Monetary tightening should theoretically exert the greatest weight on 2023 as:

Much of the tightening won’t happen until 2022 is significantly underway.

Monetary tightening operates with a lag on the economy.

More inflation on Supermarket bills? Link to article

The World Bank calculates there could be another 37% jump in food prices if the crisis continues, U.S. corn, wheat and soybeans trading near their all-time highs.

Several factors may create the “perfect storm,” including:

continued uncertainties surrounding Ukraine’s crop exports,

elevated global import demand from China,

high energy prices driving increased consumption of ethanol/renewable fuels, and

higher costs of fertilizer which may depress yields globally.

Indonesia Bans Palm Oil Exports – The ban is a positive for alternative edible oil pricing throughout the Americas. Soybean oil soared to a fresh record and Canola futures in North America gained ~3% W/W.

U.S. Winter Wheat Drought Area Increases To 70% - The amount of U.S. winter wheat considered in drought conditions increased to 70%. Only 30% of U.S. winter wheat is rated in good to excellent condition, a 26-year low.

Russia And Ukraine Conflict

The U.S. State Department used an emergency declaration for the first time during the Biden administration to approve the potential sale of $165 million worth of ammunition to Ukraine to help the country defend itself.

Russia halted gas supplies to Poland and Bulgaria as Moscow halts flows to countries that refuse to pay in rubles.

Russian forces have been forced back from Kyiv and now attempting a new advances in Ukraine's east.

Ukraine acknowledged it was taking heavy losses in Russia's assault in the east, but said Russia's losses were even worse.

What are Europe's gas options if Russia turns off the taps? With the support of Norway, the United States and Qatar along with new pipelines, wind and solar projects, Europe could effectively replace the 155 billion cubic metres of gas delivered by Russia in 2021.

Reuters

Global Insights

Elon Musk disclosed that nearly half of the vehicles it produced in the first quarter were equipped with lithium iron phosphate (LFP) batteries. A cheaper rival to the nickel-and-cobalt based cells while having ESG benefits.

Reuters

American fund manager “shocked” more international investment firms aren’t putting their money to work in Canadian stocks, considering their value relative to U.S. equities.

BNN Bloomberg

Elon Musk sold about US$4 billion worth of Tesla stock days after reaching a US$44 billion deal to buy Twitter.

BNN Bloomberg

Companies in North America and Europe plan to give more employees an equity stake in their businesses to help retain talent amid a pandemic-induced "Great Resignation".

Reuters

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