Weekly Market Pulse - Week ending August 23, 2024
Market developments
Equities: The S&P 500 index gained approximately 1.5% for the week, nearing its all-time highs. All but one (Energy) of the sectors in the S&P 500 advanced, reflecting continued investor optimism. With earnings season mostly behind us, the market is closely watching for clearer guidance on the Fed's rate cut strategy, with significant implications for investor strategies moving forward. For the third consecutive week, Canada closed higher and is up low double digits for the year.
Fixed Income: The U.S. two-year treasury yield dropped below 4% and the U.S. ten-year is ~3.8% as Federal Reserve Chair Jerome Powell noted that inflation has been easing, with recent data showing a decline. Meanwhile, he aims to prevent further deterioration in employment conditions as the labour market has shown signs of cooling.
Commodities: Gold prices remained strong, holding above $2,500 an ounce after Jerome Powell indicated that the time has come for interest rate cuts. Gold's recent price increases have also been supported by strong central bank purchases, consumer demand in China, and heightened geopolitical tensions
Performance (price return)
Source: Bloomberg, as of August 23, 2024
Macro developments
Canada – Canada's Inflation Eases Slightly, Canadian Retail Sales Rebound
The inflation rate in Canada dropped to 2.5% in July 2024, the lowest since March 2021. This aligns with the Bank of Canada's forecasts but may rise again due to gasoline prices. Inflation decelerated in shelter and food, with a slight increase in gasoline prices.
Retail sales in Canada are estimated to have increased by 0.6% in July 2024, recovering from a 0.3% drop in June. The rise was driven by gains in food, building materials, and clothing, despite a decline in gasoline turnover and motor vehicle sales.
U.S. – Business Growth Slows but Remains Strong,
The S&P Global U.S. Composite PMI dropped slightly to 54.1 in August, indicating slower but continued business growth, especially in services. Manufacturing output fell, affecting employment. Inflation showed signs of easing, though input costs remain high.
International – U.K. Business Activity Surges, Eurozone Private Sector Growth Continues, Japan's Private Sector Growth Reaches New High, Japan's Core Inflation Surges
The S&P Global U.K. Composite PMI rose to 53.4 in August, the highest since April, with strong growth in manufacturing and services. Business activity and employment increased, driven by new orders and positive economic outlook, while inflationary pressures eased.
The Eurozone Composite PMI increased to 51.2 in August, marking the sixth consecutive month of expansion. Growth was driven by the services sector, despite ongoing decline in manufacturing. Employment growth slowed, and inflation eased slightly.
The au Jibun Flash Bank Japan Composite PMI rose to 53.0 in August 2024, driven by the services sector. Employment grew, but job creation slowed. Input prices surged, while selling price inflation hit a low. Business optimism decreased to a 19-month low.
Japan's core consumer price index rose by 2.7% in July 2024, the highest since February. This marks the third consecutive month of acceleration, keeping inflation above the Bank of Japan's 2% target. The central bank’s hawkish policies have strengthened the yen and impacted financial markets.
Quick look ahead
As of August 23, 2024