| Your weekly commentary – For the week ended September 29 |
| Global equity markets fell over the week ended September 29 as the prospect of interest rates staying higher for longer weighed on investors. The S&P/TSX Composite Index declined, dragged down by the Utilities sector. U.S. equities also finished lower. The price of gold posted a relatively sharp drop for the week, while the price of oil ticked higher. Yields on 10-year government bonds in Canada and the U.S. rose over the week. |
No growth in Canada’s economy- Canada’s economy posted no growth (0.0%) in July, which followed a 0.2% contraction in June.
- Gains in Canada’s services sector in July were offset by a decline in the goods-producing industry.
- Statistics Canada estimated Canada’s economy grew by 0.1% in August.
- Sentiment among small business owners fell sharply in September, suggesting this key component of Canada’s economic health is finding the current environment challenging for their businesses.
- With Canada’s economy appearing to stall, it reinforces the Bank of Canada’s (“BoC”) decision to pause interest rates at its last meeting. The BoC makes its next rate decision on October 26, where it will need to weigh a slowing economy against elevated inflation.
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U.S. PCE remains largely unchanged- The personal consumption expenditures (“PCE”) price index in the U.S., a preferred inflation gauge for the U.S. Federal Reserve Board, was largely unchanged at 3.5% in August compared to 3.4% in July. Upward pressure came from energy prices.
- The core PCE price index fell to 3.9% in August from 4.3% in July.
- Personal spending advanced by 0.4%, driven by an increase in spending on transportation services and health care.
- However, the outlook for consumer spending in the U.S. appears uncertain. A new report from Fitch Ratings says consumer spending will slow considerably by the first quarter of 2024, due in part to a slowing labour market, easing wage growth and higher borrowing costs.
- Consumers, who are already dealing with high levels of debt, noted in a Federal Reserve Bank of New York survey that they are concerned about access to credit and their own job security.
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Drop in China’s industrial profits ease- Over the period from January to August 2023, industrial profits in China dropped by 11.7% compared to the same period last year.
- August’s drop, however, eased from the 15.5% year-over-year decline in the January to July period.
- Industries experiencing a sharp loss in profits were fuel processing, chemical products and food processing.
- Profits at China’s industrial firms have been squeezed by muted demand and higher input prices. This is representative of China’s entire manufacturing sector, which has contracted for much of this year, weighing on economic activity.
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European inflation cools- Europe’s inflation rate slowed to its lowest level since October 2021 in September.
- According to a flash estimate, Europe’s inflation rate was 4.3% in September, down from the 5.2% rate in August. September’s rate was a notch below the 4.5% rate economists had expected.
- Energy prices continued to decline, dropping by 4.7% year-over-year. Further downward pressure on Europe’s inflation came from a slowdown in the prices for food and industrial goods.
- The European Central Bank (“ECB”) raised its policy interest rate by 25 basis points at its last meeting, and new inflation data shows the ECB’s aggressive stance over the past year is aiding in its battle against inflation.
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| Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 19,541.27 | 0.81% | 5.96% | | MSCI USA Index US$ | 4,083.33 | 12.17% | 19.63% | | MSCI EAFE Index US$ | 2,031.26 | 4.49% | 22.26% | | MSCI Emerging Markets Index US$ | 952.78 | -0.38% | 8.79% | | MSCI Europe Index US$ | 1,824.94 | 5.39% | 25.43% | | MSCI AC Asia Pacific Index US$ | 157.33 | 1.02% | 13.25% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,035.82 | -1.46% | -1.36% | | FTSE World Broad Investment Grade Bond Index US$ | 198.78 | -1.70% | 2.44% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7365 | 0.50% | 1.44% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 90.79 | 13.12% | 11.77% | | Gold (US$/oz) | 1,848.63 | 1.35% | 11.33% | | Silver (US$/oz) | 22.18 | -7.41% | 17.85% |
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| Market performance – as at September 29, 2023 |
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