Market Watch: Nov. 15, 2024

In the U.S., inflation data aligned with expectations, easing some market pressures, while retail sales showed mixed results, highlighting underlying economic resilience. The Federal Reserve’s cautious stance on rate cuts, despite strong economic indicators, added to market uncertainty. In Europe, weaker-than-expected growth figures and persistent inflation concerns weighed on sentiment. China’s economic data showed signs of stabilization, with a rebound in retail sales and moderated declines in property prices, though investment remained weak. Commodity markets saw fluctuations, with oil prices steadying despite revised demand forecasts, and gold dipping slightly. Overall, these factors collectively shaped market movements, reflecting ongoing economic and policy uncertainties.

Highlights:

U.S. markets were -2.05%¹ lower for the week. Despite strong economic indicators, mixed retail sales and inflation data combined with the Fed’s cautious stance on rate cuts weighed on valuations.
Canadian markets rose 0.60%² for the week with gains in the financials, energy and info tech sectors offsetting significant losses in the materials sector.
European markets returned -2.40%³ for the week as weaker-than-expected growth figures, persistent inflation, and mixed central bank signals drove up volatility.
Emerging markets closed -2.43%⁴ lower for the week as persistently weak yet stabilizing Chinese economic data and concerns regarding protectionist trade policies caused investors to shun risk assets.

Fed signals following inflation data push bonds lower

U.S. inflation data, including Consumer Price Index (CPI) and Producer Price Index (PPI), aligned with expectations, leading to marginal movements in rates and influencing market expectations for a December rate cut by the Federal Reserve. Credit spreads tightened early in the week but widened slightly later due to an active primary market with significant new debt issuance. Fed Chair Powell’s remarks on the economic outlook added to the uncertainty, pulling back market bets on a rate cut. In Europe, weaker growth figures and persistent inflation concerns impacted sentiment. Overall, the interplay of inflation data, central bank signals, and robust debt issuance shaped the fixed income landscape throughout the week.

Highlights:

The 2- and 10-year U.S. Treasury yields were 15 basis points (bps) and 11 bps higher respectively. In Canada, the 2- and 10-year yields were also up, with the 2- and 10-year bond yields rising 12 bps and 7 bps respectively.
High yield credit spreads remained firm while investment grade spreads are slightly wider amid an active primary market that priced about $45.0bn USD of new debt..
The coming week is relatively light in terms of macroeconomic releases with housing starts and the latest set of PMIs due for U.S. Housing starts, with retail sales and inflation data for Canada are also on deck.

Weekly dashboard

Canada’s home sales in October hit highest level since April 2022

Canada’s real estate market zoomed back to life in October, with sales reaching the highest level in more than two years. Buyers finally started to take advantage of lower borrowing costs and an abundance of properties up for sale. Sales have been mostly slow for more than two years. Even after the central bank cut its benchmark interest rate in June, July, and September, prospective buyers did not make a purchase.

Highlights:

There were 43,294 transactions across the country last month after removing seasonal influences, according to the Canadian Real Estate Association (CREA).
That was 7.7% more than in September and the largest volume since April 2022, when the pandemic’s real estate frenzy was beginning to ease, owing to the Bank of Canada’s interest-rate-raising campaign.
CREA called last month’s spike in sales a surprise, and the association attributed it to the slew of properties on the market.

Higher shelter costs lift U.S. consumer prices in October

U.S. consumer prices increased as expected in October amid higher costs for shelter, such as rents, and progress toward low inflation has slowed since mid-year. The report from the U.S. Labor Department, which also showed underlying inflation continuing to run a little warmer last month, did not change expectations that the U.S. central bank would deliver a third rate cut in December.

Highlights:

A 0.4% rise in the cost of shelter, which includes rents as well as hotel and motel rooms, accounted for more than half of the increase. Shelter costs gained 0.2% in September.
Grocery store food prices edged up 0.1% amid increases in the costs of bread, dairy products as well non-alcoholic beverages and fruits and vegetables, which more than offset cheaper meats, poultry and fish. Egg prices plunged 6.4%.
Gasoline prices continued to decline, falling 0.9%. But the cost of electricity jumped 1.2%, and natural gas prices rose 0.3%.

China struggles to shake off deflationary pressures as consumer prices edge higher

China’s consumer prices edged up in October, while factory-gate prices continued to decline, underscoring the challenges Beijing faces in battling deflationary pressures despite a recent stimulus push. The lukewarm readings suggest Beijing still has work to do if it hopes to increase private confidence and lift the world’s second-largest economy out of its current deflationary trajectory.

Highlights:

According to the National Bureau of Statistics, China’s consumer-price index rose 0.3% from a year last month, compared with a 0.4% gain in September.
The producer-price index, meanwhile, fell 2.9% in October, for a 25th straight month of decline. That was steeper than the prior month’s 2.8% drop.
The inflation figures land as China has seen some signs of stabilization in its economy after policymakers’ late-September pivot to more robust stimulus support to revive growth.

¹ S&P 500 Index CAD
² S&P/TSX Composite Index CAD
³ Bloomberg Developed Markets ex N. America Large & Mid Cap Price Return Index CAD
⁴ Bloomberg EM Large & Mid Cap Price Return Index CAD

by Scotia Wealth Management - The Zukiwsky Group

Market Watch: Nov. 15, 2024

Week in review

Central bank dovishness and protectionist trade policy drives volatility

Fed signals following inflation data push bonds lower

Weekly dashboard

Canada’s home sales in October hit highest level since April 2022

Higher shelter costs lift U.S. consumer prices in October

China struggles to shake off deflationary pressures as consumer prices edge higher

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