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 iShares S&P/TSX Capped Financials Index ETF (XFN.TO) & Crude Oil Continuous Contract (CL.F)

What started out as a slow month for the markets has seen a bounce back this week with the major U.S. indices (Nasdaq, S&P 500, and Dow) notching a four-day winning streak to eat into the August pullbacks. The busy U.S. data week is highlighted with an inflation repot on Thursday and US government’s employment report.

Yesterday’s US ADP National Employment Report showed an increase of 177,000 jobs, but below expectations of 200k jobs. The second quarter US GDP estimate showed a gain of 2.1% which was below market expectations of 2.4%. While the PCE price index for Q2 was up 2.5% versus the estimate at 2.6%. All these numbers point to the Federal Reserve holding off on raising interest rates further after pausing the main interest rate at its last meeting, and many investors (89% probability according to the CME Fedwatch Tool) expect the same at the upcoming September meeting.

Oversees, investor sentiment has improved as China continues to implement measures to stimulate its economy as its largest banks are preparing to cut interest rates on existing mortgages to support consumer spending. However, China’s manufacturing activity contracted for a fifth straight month in August raising concerns.

The landfall of Hurricane Idalia on the Florida coast could lead to a rise in gas prices across the US in the near term. The impact of the hurricane could restrict Gulf oil production and as residents flee the storm. The combination of severe weather and surge in summer travel could keep prices elevated into the autumn months.

Canadian Banks had a tough week with Bank of Montreal (BMO.TO) and Bank of Nova Scotia (BNS.TO) missing analyst estimations on Tuesday as they set aside more funds to cover for bad loans. National Bank (NA.TO) missed analyst expectations on Wednesday with an earnings shortfall and heightened loan loss provisions. TD Suffered from heightened loas loss provisions and weakness in its U.S. banking division while RBC announced future layoffs amid rising expenses.

Bank of Canada’s 10 interest rate hikes since last year have slowed the housing market, increased consumer debt, and delayed mortgage repayments forcing banks to set aside more money to protect against potential loan losses.

In this edition of Equity Leaders Weekly, we look at the Canadian Financial Sector and the price of Crude Oil.

iShares S&P/TSX Capped Financials Index ETF (XFN.TO)

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