Here's a quick recap of some of this week's drivers:
- Geopolitics... Amid the buildup of Russian forces along the Ukraine border, Russia's demands to limit NATO's reach in the region were largely rejected by U.S. and NATO officials. While the window for talks remains open, the rhetoric from each side has grown louder, which is likely to keep tensions hanging over the market for the time being.
- Economic data... Resilient GDP growth and red-hot inflation pressures were evident in this week’s U.S. data from Q4, though it appears that consumer spending has lost momentum amid fading support from earlier stimulus cheques. The Omicron impact is also weighing on the near-term outlook. This was highlighted by weaker global PMI results for January, particularly on the services side.
- Central banks... Hot inflation and the current state of monetary policy accommodation has kicked central bank hawkishness into high gear. Despite both the BoC and Fed holding rates steady this week, the hawkishness of Fed Chair Jerome Powell during his press conference has many (including us) now bracing for a slightly more aggressive rate hike trajectory this year. Stay tuned for monetary policy decisions from the Bank of England and European Central Bank this coming Thursday.
Remarkably, U.S. equities managed to snap a three-week losing streak after a Herculean late-Friday rally, with the S&P rising 0.8%. The energy sector outperformed, benefiting from a seven-year high in oil prices, while utilities and industrials lagged the pack.
In Canada, the TSX also popped its head above water on Friday, rising 0.6% this week as strength in energy, consumer staples and telecom outweighed weakness in health care and materials.