Dec. 7-11, 2020
What happened last week
Investors tried to balance the good news with the bad
Ongoing issues – and a few renewed flare ups – pushed and pulled on investor sentiment throughout the week. Vaccine optimism clashed with rising case numbers and stalled fiscal stimulus in the U.S. Plus, U.S.-China tension, along with failing Brexit negotiations, reappeared in financial headlines.
Markets were mixed, seeing both record highs and daily retreats
Monday began with a muted open as investors took a wait-and-see approach on multiple issues. The biggest drivers over the last few months continued to sway the markets, specifically COVID-19, vaccine optimism, and a new financial support package for the U.S. economy. Surprising many investors was renewed U.S.-China tensions, which resurfaced on Monday after the U.S. imposed financial sanctions and a travel ban on 14 Chinese officials. The allegations centered on Beijing’s disqualification of elected opposition legislators in Hong Kong last month. Less surprising, but equally significant for financial markets, was news that Brexit negotiations between the U.K. and the European Union were in danger of collapsing. The two sides have less than three weeks to break this deadlock, with U.K. Prime Minister Boris Johnson warning that both parties may have to proceed with “no deal.”
On an historic Tuesday, the U.K. delivered its first coronavirus vaccination ahead of a much-anticipated mass rollout. Markets reacted as expected with both the S&P 500 and the Nasdaq closing at record highs, the Dow Jones Industrial Average hitting an intraday high, and Canada’s TSX closing in on a new record dating back to February. Though it’s taken longer to bounce back than its U.S. counterparts, the TSX surged 10% higher in November and has added another 3% so far this month. Since hitting its lowest point in March, the TSX has regained almost $1 trillion in market value, according to Bloomberg.
A new U.S. fiscal stimulus package has remained elusive for global investors who are eager for the much-needed boost to the U.S. economy. All four North American benchmarks sat in record territory midday Wednesday following promising reports that suggested congress was on the verge of a deal. Democrats had endorsed a US$908 billion bipartisan proposal that included increased unemployment and small business support, along with funds for state and local benefit programs. But negotiations fell flat again, dragging markets down as the closing bell rang. Big tech companies also saw a stock sell-off on Wednesday that contributed to the day’s losing numbers. Facebook took the most significant decline after the U.S. Federal Trade Commission, along with 48 states and districts, hit the social media giant with antitrust lawsuits.
Markets were largely idle on Thursday and Friday, many investors choosing to stand pat until a U.S. Federal Drug Administration (FDA) committee approved the Pfizer Inc. and BioNTech vaccine as safe for emergency use. The FDA ultimately granted approval on Friday, after the closing bell in North America. Canada approved the Pfizer vaccine two days before the FDA announcement.
Bank of Canada held its key interest steady
Coming as no surprise to investors, analysts and the financial industry, Canada’s central bank kept its benchmark interest at 0.25%. The bank reaffirmed its pledge to keep rates in check until the economy has fully recovered, which it forecasts to happen in 2023. In its statement, the bank said, “Canada's economic recovery will continue to require extraordinary monetary policy support. We remain committed to providing the monetary policy stimulus needed to support the recovery.”
The stock and bond market*
|Dow Jones Industrial Avg.
|S&P 500 Index
| 10-yr GoC Yield
|10-yr U.S. Treasury Yield
|WTI Crude Oil (US$/bbl)
|Bank of Canada Prime Rate 2.45%
*Weekly performance ending December 11, 2020. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.
U.S. Federal Reserve meetings and statement: The last Federal Open Market Committee Meeting of 2020 will take place on Dec. 15 and 16. In this meeting, the Fed will issue new forecasts and discuss the ongoing economic threats related to COVID-19 heading into the new year.
Circle these dates
- Dec. 21: Investment Update year-end review. Weekly editions resume Jan. 11
- Dec. 31: Deadline for the U.K. and EU to approve a post-Brexit trade agreement
- Jan. 20: Bank of Canada interest-rate announcement and Monetary Policy Report
- Jan. 26-27: U.S. Federal Reserve meetings and statement
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