Market Watch

Big Picture

January 22, 2016

Wild week for markets

It was a wild couple of days for markets again this week as percolating fears over slowing global growth and falling oil prices continued to send stocks up and down. Many believe it will remain volatile until oil prices find a floor. Falling oil prices are stirring concern on two fronts: rising bankruptcy potential in the energy sector and possible recessions in oil dependent countries – including Canada. Turning to China, the world’s second-largest economy put its official 2015 growth rate at 6.9% Tuesday. The figure, the lowest in 25 years, rattled nerves as China is a key engine of global economic growth. As if on cue, the IMF downgraded its forecast for global growth taking the figure down to 3.4% this year and 3.6% the next. That’s 0.2% less each year versus the Fund’s predictions in October last year. The IMF expects Canadian growth to come in at 1.7% in 2016 and 2.1% in 2017. In U.S. economic news, the consumer price index slipped 0.1% in December the Labor Department said Wednesday. Expectations were for CPI to come in flat. Housing starts also fell 2.5% in December from a month earlier pointing to a loss of momentum at the end of 2015. A measure of relief for markets came Thursday after the European Central Bank’s monthly policy meeting. The ECB did not trim interest or deposit rates keeping them at 0.05% and minus 0.3%, respectively, but central bank head Mario Draghi did say he was willing to provide more stimulus at the bank’s March meeting. Forcing his hand is the euro-zone’s annual rate of inflation which was just 0.2% in December – well below the ECB’s medium-term target of 2%. In related news, the Bank of Canada did not cut interest rates at its Wednesday meeting.



 Stocks remain volatile

Stocks remained volatile through Thursday with the Dow making intraday swings of more than 500 pts. The Dow and S&P 500 are currently on pace for their worst monthly performances since February 2009 – the last month of post-financial crisis losses. That said, we have a week of trade left in January and much can happen as market watchers know. For the four-day period covered in this report, the Dow fell 106 pts. to close at 15,882, the S&P 500 shed 12 pts. to settle at 1,868 and the Nasdaq gave back 16 pts. to finish at 4,472. The TSX closed Thursday at 12,035, off 38 pts.