Media Room
The week in the markets –
August 11, 2023
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Inflation fought the Fed, and the Fed won
- U.S. Consumer Price Index data updates.
- Chinese imports and exports showing slower global demand.
- Cautious optimism and a soft-landing scenario.
The latest Consumer Price Index (CPI) report was recently released in the U.S., with the year-over-year headline CPI reaching 3.2%, which was consistent with consensus expectations. The recent data indicates downward price pressure, with durable goods prices experiencing a decline of 1.4% compared to the previous year.
Despite inflation remaining above the Fed's 2% target, we’re confident that the period of elevated inflation has passed. We expect price inflation to remain within the mid-3% range over the next six months, with our longer-term outlook being lower rather than higher inflation. This lower and more stable inflation gives us more confidence that the Fed and the Bank of Canada have likely concluded their cycle of interest rate increases.
Looking at China, recent data indicates notable declines in both imports and exports for July, reflecting some challenges in the global economic landscape. Import figures for July fell by 12.4% on a year-over-year basis, which was worse than expectations for a 5.6% decrease. Similarly, exports contracted by 14.5%, surpassing expectations for a 13.2% decline.
These figures indicate the challenges faced by the Chinese economy in maintaining global trade growth. It's noteworthy that the pace of export decline was the fastest since early 2020, when the pandemic began, while the dip in imports was the most substantial since January 2023, when COVID-19-related restrictions were in place. While the weakness in Chinese imports and exports was worse than expected, this does support moderating inflation expectations. As demand for manufactured goods wanes, prices should continue to trend lower.
While one data point may not be a trend, nevertheless, the second largest economy in the world is showing slower growth, and its customers, including the United States, Japan and Europe, are buying less. Looking ahead, while we believe that inflation is no longer a problem, we aren’t as willing to give the green light on the global economy yet. A soft-landing scenario remains our base case, based on the data, and we do not forecast a full-blown recession, but at the same time we can’t let our guard down.
Listen for further insights on this week’s podcast.
This week's market closing value - week ending August 11, 2023
(As of 4:00 PM ET.*)
| EQUITY INDICES | Level | Change | WTD | YTD | 1-year | 5-year |
| CAD | CAD | CAD | CAD | |||
| S&P/TSX | 20,399.72 | 172.15 | 0.85% | 5.31% | 2.04% | 4.56% |
| S&P 500 | 4,463.26 | -14.19 | 0.14% | 15.85% | 11.75% | 10.02% |
| DJIA | 35,281.47 | 214.27 | 1.08% | 5.71% | 11.49% | 7.36% |
| FTSE 100 | 7,524.16 | -40.21 | -0.40% | 5.33% | 10.39% | -0.02% |
| CAC 40 | 7,340.19 | 25.12 | 0.27% | 15.12% | 25.31% | 5.87% |
| DAX | 15,832.17 | -119.69 | -0.83% | 15.45% | 29.17% | 4.57% |
| Nikkei | 32,473.65 | 280.90 | -0.85% | 11.92% | 12.86% | 2.65% |
| Hang Seng | 19,075.19 | -464.27 | -2.01% | -4.38% | 0.43% | -7.13% |
| CURRENCY RETURNS | CAD | Change | WTD | YTD | 1-year | 5-year |
| US$ | 1.3446 | 0.0062 | 0.46% | -0.69% | 5.34% | 0.46% |
| Euro | 1.4719 | -0.0011 | -0.08% | 1.53% | 11.73% | -0.38% |
| Yen | 0.0093 | -0.0002 | -1.71% | -10.06% | -3.32% | -4.78% |
| CANADIAN TREASURIES | Yield | Change | COMMODITIES | USD | Change |
|---|---|---|---|---|---|
| 3-month | 5.05 | 0.04 | Oil | $83.09 | $0.47 |
| 5-year | 3.99 | 0.12 | Gold | $1,913.93 | -$27.38 |
| 10-year | 3.65 | 0.10 | Natural Gas | $2.78 | $0.20 |
| CANADIAN PRIME RATE |
|---|
| 7.20% |
*The data contained in the charts above is provided by Bloomberg as of 4:00 PM ET. Please note that the final closing market values may vary due to data delays and market settlement.
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