|  | | | | | Your weekly commentary – For the week ended February 24 | | Global equity markets ended the week down as investors considered the prospect of more rate increases by the U.S. Federal Reserve Board (“Fed”) and how that may affect economic conditions, particularly as the Fed’s preferred inflation gauge, the personal consumption expenditures price index, came in higher than expected. In Canada, the S&P/TSX Composite Index dropped, pulled down by the Information Technology sector. In the U.S., the S&P 500 Index also declined, with all but one sector finishing in negative territory. The price of gold finished lower, while the price of oil finished largely unchanged. In fixed income markets, the yield on 10-year government bonds in Canada and the U.S. increased. | Canada’s inflation continues slowdown- Canada’s inflation rate was 5.9% in January, moderating from December’s 6.3% rate.
- Inflation was below the 6.1% rate economists expected and was the lowest rate of annual inflation since February 2022.
- Easing price growth for gasoline, passenger vehicles and shelter drove the slowdown. Conversely, food prices rose faster in January.
- The continued slowdown in Canada’s inflation rate might give credence to the Bank of Canada’s decision to pause interest rate increases.
| Canada’s retail sales climb higher in December- Retail sales in Canada rose 0.5% in December, following no growth (0.0%) in November.
- Canadian consumers showed relative resiliency in December amid much tighter financial conditions.
- Consumer spending remains relatively strong as households benefit from higher savings rates and a strong labour market.
- Sales increased in seven of 11 tracked categories, with notable advances at motor vehicle and parts dealers and general merchandise stores.
| U.S. Fed releases meeting minutes- The Fed released the minutes from its first meeting of 2023, held at the beginning of February.
- The minutes revealed most Fed officials approved of a 25-basis-points (“bps”) rate increase, but a few officials believed a 50-bps-rate hike was warranted.
- Fed officials suggest interest rates will likely keep climbing until the central bank feels confident inflation will return to its 2% target.
- There were also concerns that not going high enough with interest rates might not pull down inflation enough, suggesting the Fed may surpass its earlier projection of a 5.1% rate.
| European business activity improves again- According to the S&P Global Eurozone Composite Purchasing Managers Index, business activity in Europe expanded for a second straight month in February.
- A preliminary estimate showed the index rose to 52.3 in February from 50.3 in January. Economists expected a reading of 50.7.
- The main growth driver came from Europe’s service sector, which expanded faster in February due to stronger activity in the financial services and tourism industries.
- Europe’s manufacturing sector was less fortunate as it contracted in February. However, production in the sector increased over the month, suggesting the sector could be turning the corner and may be poised to return to expansion.
| | Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 20,219.19 | 4.30% | -2.61% | | S&P 500 Index US$ | 3,970.04 | 3.40% | -7.43% | | Dow Jones Industrial Average US$ | 32,816.92 | -1.00% | -1.22% | | MSCI EAFE Index US$ | 2,035.26 | 4.70% | -3.45% | | MSCI Emerging Markets Index US$ | 971.87 | 1.62% | -15.85% | | MSCI Europe Index US$ | 1,842.26 | 6.39% | -0.86% | | MSCI AC Asia Pacific Index US$ | 158.75 | 1.93% | -11.66% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,055.46 | 0.41% | -6.80% | | FTSE World Broad Investment Grade Bond Index US$ | 201.75 | -0.23% | -13.40% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7347 | 0.03% | -5.42% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 76.32 | -4.91% | -17.77% | | Gold (US$/oz) | 1,811.04 | -0.71% | -4.88% |
| | Market performance – as at February 24, 2023 | |
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