| Your weekly commentary – For the week ended April 28 | | Sentiment in global equity markets was mostly down over the week ended April 28 as First Republic Bank reported a sharp drop in deposits, raising concerns about the U.S. banking sector. Meanwhile, investors continued to analyze economic data to predict the next rate decision by the U.S. Federal Reserve Board. In Canada, the S&P/TSX Composite Index dropped, dragged down by the Industrials sector. The S&P 500 Index finished higher. Yields on 10-year government bonds in Canada and the U.S. finished lower. The price of oil dropped over the week. | BoC considered another rate hike- The Bank of Canada ("BoC") released the Summary of Deliberations from its last meeting on April 12.
- The meeting notes showed officials considered raising its benchmark overnight interest rate as the economy was proving relatively stable.
- The BoC left its key interest rate at 4.50% based on the belief it is helping pull supply and demand back into balance within the Canadian economy.
- Regarding a rate cut in 2023, the BoC officials believed it was gaining traction amid the expectations Canada's economy would fall into a recession. However, Canada's central bank estimates that growth will slow but won't likely fall into a recession, suggesting a rate cut might not be implemented this year.
| Reigniting concerns about the U.S. banking sector- First Republic released its first-quarter earnings results, showing deposits experienced a 41% drop. It spooked investors and reignited concerns about the U.S. banking system.
- After the collapse of Silicon Valley Bank, First Republic also came under pressure largely due to a lack of confidence in regional banks with a high level of uninsured deposits. In addition, surging interest rates hurt the value of the bank's long-term bond holdings.
- After the report, the company's shares fell sharply, and lawmakers, regulators and banking executives searched for a solution to help First Republic.
- In March, First Republic received US$30 billion in fresh capital from a consortium of larger banks in the U.S. to help restore confidence and ensure deposit strength.
| U.S. economic growth misses expectations- A preliminary estimate revealed economic growth in the U.S. slowed considerably in the first quarter of 2023.
- U.S. gross domestic product expanded by 1.1%, annualized in the first quarter of 2023, down from the 2.6% growth rate in the previous quarter. Economists expected a 1.9% expansion.
- The U.S. economy was boosted by a strong rise in consumer spending, despite tighter financial conditions. This was partially offset by a drop in real estate investment and business inventories.
- Meanwhile, Statistics Canada reported Canada's economy grew by 0.1% in February, its second straight monthly increase. However, early projections show Canada's economy contracted by 0.1% in March.
| Europe posts muted economic growth- Europe's economy expanded by 0.1% in the first quarter of 2023, higher than the 0.1% contraction posted in the final quarter of 2022.
- High inflation, rising interest rates and ongoing geopolitical tensions continue to pressure Europe's economy.
- While Europe appears to have avoided a recession up to now, the outlook remains uncertain. Tighter financial conditions will likely persist, and further troubles in the banking sector could hinder credit markets, which could weigh on households and businesses.
- Among the largest economies, Germany's economy was largely unchanged, while France and Italy expanded.
| | Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 20,636.54 | 6.46% | -2.29% | | MSCI USA Index US$ | 3,950.69 | 8.53% | -3.46% | | MSCI EAFE Index US$ | 2,143.85 | 10.28% | 6.52% | | MSCI Emerging Markets Index US$ | 977.05 | 2.16% | -7.28% | | MSCI Europe Index US$ | 1,971.69 | 13.87% | 10.22% | | MSCI AC Asia Pacific Index US$ | 160.32 | 2.94% | -3.21% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,095.61 | 4.23% | 1.83% | | FTSE World Broad Investment Grade Bond Index US$ | 210.42 | 4.06% | -2.25% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7379 | -0.29% | -5.76% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 76.78 | -4.34% | -27.13% | | Gold (US$/oz) | 1,990.06 | 9.10% | 5.04% |
| | Market performance – as at April 28, 2023 | |
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