|  | | | | | Your weekly commentary – For the week ended July 7 | | Equities began the second half of the year with a whimper. Global equities declined over the week ended July 7. Strong jobs reports in the U.S. heightened expectations there would be more rate hikes from the U.S. Federal Reserve Board ("Fed"). The S&P/TSX Composite Index declined, hindered by weakness in the Information Technology sector. U.S. equities, as measured by the MSCI USA Index, also finished lower. The yield on 10-year government bonds in Canada and the U.S. rose over the week. The price of oil advanced, as did the price of gold. | Canada posts deep trade deficit- Exports from Canada sunk by 3.8% to $61.5 billion in May, marking the country's lowest value of exports since early 2022. Exports dropped for energy products, due in part to lower prices. Shipments for agricultural and forestry products also declined in May.
- Imports, on the other hand, rose by 3.0% to $65.0 billion in May, another signal of relatively strong demand in Canada.
- Canada's trade balance fell into a $3.44 billion deficit in May, its first in three months and the steepest deficit since October 2020.
- Net exports were a key contributor to Canada's economic growth in the first quarter. Fading trade activity could hinder Canada's economic activity.
| North American economies add jobs- The Canadian economy added 60,000 jobs in June, rebounding from the 17,300 job losses in the previous month. This marked the highest number of job additions since January, largely in response to robust gains in the wholesale and retail trade industry.
- Canada's unemployment rate ticked higher to 5.4% in June.
- In the U.S., the unemployment rate dropped to 3.6% in June, adding 209,000 jobs, but this fell short of economists' expectations. Still, the labour market remains robust, which may give the Fed more runway to lift interest rates.
- In a separate report, ADP announced U.S. private businesses added 427,000 jobs in June, which was the highest number of monthly job additions since February 2022.
- Job additions were highest in the service-producing industries, which is indicative of household spending patterns, particularly coming out of the pandemic. The leisure and hospitality industry added 232,000 jobs over the month, which more than offset a drop in jobs in the manufacturing sector.
| European business activity contracts for the first time this year- Business activity in Europe shrank in June, its first contraction in 2023, in response to a slowdown in Europe's service sector and another contraction in manufacturing activity.
- Relatively muted demand weighed on new orders, pushing the manufacturing sector further into a contraction.
- The service sector expanded in June, but at a much slower pace than in May, hurt by lower new work.
- The European economy fell into a technical recession in the first quarter, and conditions still appear weak in the second quarter. May's retail sales posted no growth for the second straight month.
| OECD says inflation reached lowest rate since 2021- The Organisation for Economic Co-operation and Development reported that inflation among its members dropped to 6.5% in May, its lowest level since December 2021.
- The easing rate of inflation in May came in response to a 5.1% decline in energy prices, while the price of food also slowed during the month. These are two notable expenditures for global households, so the moderation provides some relief to consumers.
- The core inflation rate, which excludes more volatile food and energy prices, eased in May to 6.9% but remained at elevated levels. The high core inflation rate suggests price pressures are broad-based, and not limited to just energy or food.
- Among G7 countries, inflation softened to 4.6% in May, with the U.K. carrying the highest rate for the month. Canada's inflation rate was 3.4% in May.
- Despite moderating, elevated inflationary pressures persisted, which could prompt central banks to keep raising interest rates.
| | Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 19,831.04 | 2.30% | 4.03% | | MSCI USA Index US$ | 4,180.11 | 14.83% | 12.64% | | MSCI EAFE Index US$ | 2,087.72 | 7.40% | 12.88% | | MSCI Emerging Markets Index US$ | 980.66 | 2.54% | -1.89% | | MSCI Europe Index US$ | 1,874.87 | 8.28% | 16.24% | | MSCI AC Asia Pacific Index US$ | 161.66 | 3.80% | 1.88% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,057.59 | 0.61% | 1.49% | | FTSE World Broad Investment Grade Bond Index US$ | 204.88 | 1.32% | -1.11% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7534 | 2.11% | -2.46% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 73.86 | -7.97% | -29.52% | | Gold (US$/oz) | 1,925.05 | 5.54% | 10.48% |
| | Market performance – as at July 7, 2023 | | | |
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