|  | | | | | Your weekly commentary – For the week ended July 14 | | Global equity markets advanced over the week ended July 14 as economic data pointed to the U.S. Federal Reserve Board ("Fed") nearing the end of its interest rate increases. The S&P/TSX Composite Index advanced, led by the Information Technology sector. U.S. equities, as measured by the MSCI USA Index, also gained. Yields on 10-year government bonds in Canada and the U.S. moved lower. Oil and gold prices rose over the week. | BoC raises key interest rate again- In a widely expected move, the Bank of Canada ("BoC") raised its benchmark overnight interest rate by 25 basis points to 5.00%.
- This marked the BoC's second consecutive rate hike, after two straight pauses in March and April, taking its key rate to its highest level since 2001.
- The BoC believes its interest rate hike was warranted as a strong labour market and robust spending by Canadians has kept inflation persistently high.
- The BoC reiterated its commitment to price stability, noting it will monitor economic data carefully ahead of any future decisions.
- New projections show the BoC expects inflation to remain near 3% before clawing back to its 2% target in 2025.
| U.S. inflation moderates more than expected- The U.S. inflation rate softened at a relatively quick pace in June, relieving many U.S. consumers, who remain challenged by tight financial conditions.
- The inflation rate was down to 3.0% in June from 4.0% in May, and just below the 3.1% rate economists had expected.
- Energy prices fell markedly compared to the same time last year when prices were elevated due in part to Russia's invasion of Ukraine. Prices for food, new vehicles and shelter slowed in June.
- Despite inflation coming down, the Fed looks poised to keep raising its federal funds rate. However, June's data may signal that the Fed is coming close to ending its interest rate hikes.
| Higher bank loans in China spurred by lower rates- New loans from China's banks increased substantially in June, rising to CNY3.05 trillion (C$560.5 billion) from CNY1.36 trillion (C$249.9 billion) in the previous month.
- The increased demand for credit is welcome news for China. The People's Bank of China recently reduced its one- and five-year loan prime rates to help spur credit growth, particularly for households, which is expected to help boost economic activity.
- Expectations are heightening that more stimulus from the government may be on the way as gross domestic product growth is currently running below the government's 2023 target.
- Economic activity has been relatively lacklustre in 2023, with lower trade activity weighing on the economy. Both exports and imports fell sharply year-over-year in June.
| Gross domestic product in the U.K. contracts- Economic data out of the U.K. reveals weakness in its economy amid high inflation and rising borrowing costs.
- The U.K. economy shrank by 0.1% in May, following a 0.2% expansion in the previous month.
- Wholesale and retail trade activity dropped over the quarter, as did construction sector activity.
- Industrial production in the U.K. sank by 0.6%, its fourth drop in the last five months.
- Tight financial conditions are likely to persist, with inflation still at decades-high levels and the Bank of England appearing poised to raise rates further.
| | Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 20,262.07 | 4.52% | 10.55% | | MSCI USA Index US$ | 4,287.10 | 17.77% | 19.01% | | MSCI EAFE Index US$ | 2,188.99 | 12.61% | 22.64% | | MSCI Emerging Markets Index US$ | 1,028.49 | 7.54% | 6.53% | | MSCI Europe Index US$ | 1,981.05 | 14.41% | 27.47% | | MSCI AC Asia Pacific Index US$ | 168.75 | 8.35% | 9.24% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,069.64 | 1.76% | 1.84% | | FTSE World Broad Investment Grade Bond Index US$ | 209.59 | 3.65% | 0.83% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7566 | 3.39% | 0.07% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 75.42 | -6.03% | -21.26% | | Gold (US$/oz) | 1,955.21 | 7.19% | 14.34% |
| | Market performance – as at July 14, 2023 | | | |
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