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By Fund Library News Wire  | Friday, August 05, 2016

By Mike Keerma

The main North American stock benchmarks surged again this past week, as the U.S. labor market posted another month of job gains in July, raising hopes that the U.S. economy will continue to expand going into the fourth quarter of the year. The S&P 500 Composite Index ended the week up 0.4%, while the Nasdaq Composite Index gained 1.1% on the week. Both indices closed at record highs, while Toronto’s S&P/TSX Composite Index, led by energy and financials, closed the week at a 52-week high, for a gain of 0.5%.

Following on a strong June employment report that saw gain of 259,000 jobs in the U.S., the Commerce Dept. reported an additional 217,000 new jobs created in July. The unemployment rate remained at 4.9%. The two robust consecutive monthly job gains following weakness in April and May bolstered market sentiment, with increased optimism that consumer spending will support the bulk of economic growth for the rest of the year.

The Canadian job creation picture wasn’t quite as rosy, however. Statistics Canada reported a net job loss of 31,200 jobs in July, following on a month of near-zero job growth in June. A posted loss of 42,000 public sector jobs is blamed for the decline, although most analysts agree this is an anomaly and will likely see a rebound in coming months. Canada’s unemployment rate ticked up to 6.9% from 6.8% in June.

Canada’ balance of trade figures also added to the general sense of macro gloom, as the trade deficit expanded to $3.6 billion in June, its worst month on record. Declining exports continue to weigh on GDP growth in the second quarter, dropping at an annual -17.7% rate, while imports shrank an annual -5.6% in the same period. The Canadian dollar dropped a cent from Thursday’s close of US$0.77 to end Friday at US$0.76.

In the U.K., the Bank of England cut its benchmark interest rate to 0.25% from 0.5% in a larger-than-expected package of monetary stimulus that included a revived bond-buying program, which had been on hold since 2012. The BoE said the stimulus is necessary to combat a perceived slowdown in business and consumer confidence and an expected slowdown in growth as the U.K. negotiates its exit from the European Union, and renegotiates trade treaties with the rest of the world. The British pound closed at US$1.307, down from US$1.323 a week ago. U.K. 10-year government bonds (gilts) closed the week at a yield of 0.67%, recovering slightly from Thursday’s record low of 0.644%.

In business news, BCE Inc. (TSX: BCE), Canada’s largest telecommunications company, reported adjusted second-quarter profit of $820 million ($0.94 per share), up from $725 million ($0.91 per share) in the same period a year ago. The company cited growing smartphone data use on its faster 4G LTE network for the results.

Restaurant Brands International Inc. (TSX: QSR), the parent of fast-food chains Tim Hortons and Burger King, reported higher second-quarter profits of US$90.9 million (US$0.38 per share), up from US$11 million (US$0.05 per share) in the same quarter last year. The company cited restaurant expansion and higher sales of wraps and salads for the results.

Meanwhile, Canada’s largest insurance company Manulife Financial Corp. (TSX: MFC), reported second-quarter net income of $704 million ($0.34 per share, diluted) compared with $600 million ($0.29 per share) for the year-ago period. The company cited a drop in interest rates and market volatility arising in part from the Brexit vote as leading contributors to the lower-than-expected earnings report.

Fund sponsor and wealth management company CI Financial Corp. (TSX: CIX) reported second-quarter net income of $128.6 million ($0.47 per share), compared with $138.9 million ($0.51 per share) for the same period last year. “CI’s assets under management have grown to record levels, reaching $113 billion in July,” said CEO Peter Anderson in a release. “We continue to make significant investments in our business where we see strategic opportunities, including our sales team, technology, and Assante Wealth Management,” he added.

Check Fund Library’s Market Activity page regularly for active updates on key market indexes and commodities.

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© 2016 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

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