Media Room
The week in the markets -
May 19, 2023
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Inflation in Canada remains sticky; how will the Bank of Canada react?
The Bank of Canada (BoC) released its Financial System Review this week, which examines risks in the Canadian banking system. The report found the spillover effects in Canada from the recent turmoil in U.S. regional banks have been limited. The BoC also reviewed risks to Canadian households and the rising debt burden, given that borrowing costs have increased since last year.
The Canadian Consumer Price Index (CPI) data for April came in at 4.4% from one year ago, an increase of 0.7% month-over-month. The main catalyst behind this slight acceleration was attributed to rising shelter costs, as mortgage interest costs surged by 28.5% on an annual basis, and a larger number of homeowners faced escalating borrowing rates. Rents saw a hike of 6.1% compared to the previous year. This poses an interesting challenge for the BoC and its inflation fight. The higher month-over-month inflation rate comes as a consequence of the Bank of Canada raising interest rates. Therefore, the modest tick higher in inflation should be largely discounted, in our view. Looking ahead, it’s likely that inflation will continue its downward trajectory.
The U.S. debt ceiling debate continues to weigh on investors’ minds. While we are confident in the outcome (that Congress and the White House will come to an agreement), the wait-and-see attitude and potential delays raise questions in the minds of investors. In spite of the headline risks, equity markets continued to push higher, testing the 4,200 resistance level on the S&P 500 Index.
The resurging interest in technology-related stocks is now, more than ever, propelling market performance. This wave of investment is predominantly targeted towards mega-cap tech and AI-related stocks, which are increasingly capturing the attention of today's investors. Notably this year, the NASDAQ has significantly outperformed both the S&P 500 and the Russell 2000, a trend which persisted into this week. It is, however, yet to be determined when, and if, valuation concerns begin to weigh on this tech-dominated index.
As we look ahead to the next few weeks, we’re watching for indicators that the Bank of Canada will maintain a pause on interest rates in June, before GDP and unemployment data is released.
This week's market closing value - week ending May 19, 2023
(As of 4:00 PM ET.*)
| EQUITY INDICES | Level | Change | 1-week | YTD | 1-year | 5-year |
| CAD | CAD | CAD | CAD | |||
| S&P/TSX | 20,352.45 | -42.80 | -0.21% | 5.07% | 0.84% | 4.72% |
| S&P 500 | 4,192.56 | 75.20 | 1.48% | 9.32% | 13.20% | 10.13% |
| DJIA | 33,426.43 | 125.81 | 0.04% | 0.60% | 12.64% | 7.23% |
| FTSE 100 | 7,756.87 | 2.25 | -0.30% | 6.94% | 11.73% | -0.68% |
| CAC 40 | 7,491.96 | 77.11 | 0.30% | 16.54% | 28.38% | 5.13% |
| DAX | 16,275.38 | 361.56 | 1.52% | 17.71% | 26.02% | 3.67% |
| Nikkei | 30,808.35 | 1,420.05 | 2.74% | 12.06% | 13.87% | 2.49% |
| Hang Seng | 19,450.57 | -176.67 | -0.90% | -2.03% | 2.25% | -7.99% |
| CURRENCY RETURNS | CAD | Change | 1-week | YTD | 1-year | 5-year |
|---|---|---|---|---|---|---|
| USD | 1.3507 | -0.0046 | -0.34% | -0.24% | 5.32% | 0.95% |
| Euro | 1.4598 | -0.0108 | -0.73% | 0.70% | 7.49% | -0.76% |
| Yen | 0.0098 | -0.0002 | -1.99% | -5.08% | -2.41% | -3.39% |
| CANADIAN TREASURIES | Yield | Change | COMMODITIES | USD | Change |
|---|---|---|---|---|---|
| 3-month | 4.49 | 0.07 | Oil | $71.75 | $1.60 |
| 5-year | 3.30 | 0.29 | Gold | $1,976.46 | -$34.83 |
| 10-year | 3.13 | 0.25 | Natural Gas | $2.60 | $0.32 |
| CANADIAN PRIME RATE |
|---|
| 6.70% |
*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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