What’s going on here?
Canada’s main stock index, the S&P/TSX Composite Index, closed at a record high of 22,693.91, lifted by strong performances in the communication services and consumer discretionary sectors.
What does this mean?
The S&P/TSX Composite Index climbed 0.66% this week, marking its third consecutive weekly gain. Leading the charge were communication services, with Cogeco Communications seeing a 5.9% rise after surpassing third-quarter revenue estimates. Consumer discretionary stocks also got a boost, highlighted by Aritzia’s impressive 11.3% jump after exceeding first-quarter earnings expectations. This positive movement comes despite US inflation data showing a 0.2% rise in the Producer Price Index (PPI) for June – slightly above expectations but still encouraging hopes for a Fed rate cut. An investment strategist at Manulife Investment Management noted that the slowing US economy sets the stage for the Fed to begin rate cuts in September.
Why should I care?
For markets: Navigating economic shifts.
Investors in Canada and the US are closely watching inflation data and Fed rate-cut expectations. The modest rise in the US PPI hasn’t dampened optimism for a September rate cut, with markets maintaining a 96.2% probability. Meanwhile, US market sentiment remains positive, buoyed by mixed results from major banks. This cautious optimism has helped keep indexes on an upward trajectory, reflecting investor confidence despite economic uncertainties.
The bigger picture: Global economic changes on the horizon.
Canada’s upcoming inflation data will be crucial in shaping the Bank of Canada’s (BoC) monetary policy decisions. Investors are particularly focused on how this data could influence the BoC’s rate expectations ahead of its July 24 meeting. Across the border, softer US consumer price readings continue to bolster hopes of a sustained downward trend in inflation, setting the stage for potential rate cuts by the Federal Reserve. These developments highlight significant global economic shifts, with central banks playing a critical role in navigating through inflationary pressures and economic slowdowns.