| Your weekly commentary – For the week ended April 14 |
| Global equity markets ticked higher over the week as slower economic conditions suggested the U.S. Federal Reserve Board (“Fed”) was nearing the end of its interest rate hikes. The S&P/TSX Composite Index finished higher, led by the Energy sector. U.S. equities, as measured by the S&P 500 Index, also advanced over the week. The price of oil finished higher, while gold prices ended largely flat. Yields on 10-year government bonds in Canada and the U.S. advanced. |
The BoC holds steady again- At its April meeting, the Bank of Canada (“BoC”) held its benchmark overnight interest rate steady at 4.50%. This was the BoC’s second straight rate pause after signalling its intention to do so earlier in 2023.
- The BoC believes recent data shows inflation may continue to ease.
- Canada’s central bank reiterated it would be willing to lift interest rates further if warranted.
- In its Monetary Policy Report, the BoC raised its projection for economic growth in Canada this year to 1.4% and expects inflation to return closer to its 2% target by the end of 2024. Their projections suggest an interest rate cut is unlikely in 2023.
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U.S. retail sales drop more than expected- Retail sales in the U.S. dropped by 1.0% in March, lower than the 0.5% decline economists expected.
- It was the second straight monthly decline.
- The drop was the largest since November due to a fall in sales at gasoline stations, auto dealers, and for electronics and appliances.
- The result suggests that U.S. consumer strength could be weakening amid tighter financial conditions.
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World’s two largest economies post lower inflation rates- The rate of inflation in the U.S. eased to 5.0% in March from 6.0% in February. It was the slowest pace of annual inflation since May 2021.
- A decline in energy prices drove the slowdown, while the price growth of food moderated during the month.
- Despite the moderation in March, the rate remains well above the Fed’s desired target of 2%. Markets expect another interest rate increase by the Fed at its next meeting at the beginning of May.
- Meanwhile, inflation in China also eased in March, reaching 0.7%. It was the country’s slowest pace of annual inflation since September 2021.
- With inflation running low partly due to weaker domestic demand, China’s economy could struggle to meet the government’s 5% growth target this year.
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Developing its own foreign policy strategy- French President Emmanuel Macron commented that Europe should stay out of tensions brewing between the U.S. and China over Taiwan.
- He said Europe should have its own global political strategy, including that related to Taiwan, rather than following the stance of other nations. He also said Europe should better fund its defence and renewable energy initiatives and not rely as much on the U.S.
- The comments were widely criticized by officials in the U.S. and elsewhere in Europe.
- Europe’s economy is closely tied to the U.S. and China through key trade relationships. Any geopolitical tensions that might affect this relationship could weigh on Europe’s economic growth.
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| Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 20,579.91 | 6.16% | -5.84% | | S&P 500 Index US$ | 4,137.64 | 7.77% | -5.80% | | Dow Jones Industrial Average US$ | 33,886.47 | 2.23% | -1.64% | | MSCI EAFE Index US$ | 2,145.72 | 10.38% | 1.28% | | MSCI Emerging Markets Index US$ | 1,000.49 | 4.61% | -10.46% | | MSCI Europe Index US$ | 1,966.62 | 13.57% | 4.38% | | MSCI AC Asia Pacific Index US$ | 163.29 | 4.85% | -6.52% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,078.06 | 2.56% | -0.33% | | FTSE World Broad Investment Grade Bond Index US$ | 209.28 | 3.49% | -4.69% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7477 | 1.63% | -5.50% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 82.52 | 2.82% | -22.84% | | Gold (US$/oz) | 2,004.17 | 9.88% | 1.54% |
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| Market performance – as at April 14, 2023 |
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