Investors brace for more volatility
Investors should prepare themselves for more volatility as markets look to a number of important economic releases in hopes of greater clarity on how North American and European economies are faring.
In Canada, the key data for the week will come on Tuesday when the monthly GDP report for July is released. Economists are expecting gross domestic product to remain unchanged at 0.3%, an indication that the Canadian economy has slowed somewhat since the first half of the year.
“We lost some of the momentum we saw in the late spring,” said Peter Buchanan, a senior economist with CIBC World Markets.
Analysts expect the gains to come from strong car sales that have boosted manufacturing, and increased export demand, while wholesale volumes and retail spending will prove a weight. If predictions on GDP are correct, the numbers are expected to have a negative effect on the loonie, which has been brought down to the US90-cent range in recent weeks.
Meanwhile, traders are expecting Canada’s merchandise trade surplus for August to narrow to $1.8-billion from $2.6-billion in July when Statistics Canada reports on Friday. Strength is expected in crude oil exports and domestic car sales.
In the U.S, markets will look for reassurances from the latest payrolls figures, also out on Friday. Analysts expect to see a gain in September, believing that the disappointingly low August figure was just an anomaly.
Expectations are that there was a gain of 213,000 jobs in September, compared with 142,000 in August.
“Most of the advance indicators we look at are pretty positive,” said Derek Holt, vice-president of Scotiabank Economics. “The initial jobless claims have been quite low and the job vacancies remains very elevated so that’s a sign of business confidence when it comes to hiring — the fact they have so many jobs they’ve been unable to fill so far.”
If the figures meet expectations, it will quell some concerns that the U.S. Federal Reserve may have about the state of the overall labour market, which it has cited as a key factor in its rate decisions. Meanwhile, Hong Kong investors prepare for a stock-market retreat and have made arrangements to work outside the financial district due to the biggest police crackdown on protesters since the city returned to Chinese rule.
The benchmark Hang Seng index will probably open “sharply” lower, according to Kingston Financial Group Ltd. Hong Kong’s currency will face selling pressure and funding costs may rise, Brilliant & Bright Investment Consultancy Ltd. predicted. BNP Paribas Investment Partners will shift staff to a site in Kowloon, a 15-minute ferry ride north across the harbour from Hong Kong island.
Police clad in riot gear used tear gas and pepper spray to scatter protesters after they surrounded government buildings and blocked traffic on main roads in and around the central business district, home to the world’s fifth-largest stock market. The showdown adds to concerns about falling retail sales and rising U.S. interest rates that have fuelled a 6.5-per-cent drop in the Hang Seng index from this year’s high on Sept. 3.
“Sentiment will be bad,” said Arthur Kwong, the Hong Kong-based head of Asia Pacific equities at BNP Paribas Investment Partners, which manages about US$650 billion. “Unfortunately, the macro fundamentals are weak already.”
Hong Kong Exchanges & Clearing Ltd. said it’s monitoring the protests and has contingency plans. The bourse sees no reason to cancel trading, spokeswoman Lorraine Chan said.