Market Watch — Sept. 18, 2026

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Week in review

Court

Robbery charge withdrawn against Ponoka man, still faces trial in alleged break-and-enter

4h ago

November 2023 Incident

Stay of proceedings for Red Deer woman charged in northern Alberta homicide

5h ago

December 2024 Incident

Man sentenced in Red Deer stabbing

5h ago

Investors absorb the first Fed rate hike in three years

U.S. equities began cautiously as AI-development concerns pressured technology stocks and rising oil prices and Treasury yields reinforced expectations for tighter monetary policy. Strong retail sales then supported the growth outlook, although markets sold off after the Federal Reserve (Fed) raised rates and signalled further tightening before rebounding as oil prices eased, and the decision was absorbed. Canadian equities traded against a domestic backdrop of in-line inflation that left Bank of Canada expectations intact, softer factory sales and a weaker Loonie, with swings in crude prices driving the sector tone. European equities weakened initially as energy-driven inflation concerns lifted yields, firmed after U.K. inflation reduced near-term Bank of England (BoE) tightening expectations, and softened Friday. Chinese and emerging-market equities were mixed early but improved later, alongside broader Asian gains, despite dollar strength and uncertainty following cautious Bank of Japan (BoJ) guidance.

• U.S. equities closed -0.06%¹ lower, with a soft, tech-led start giving way to a consumer-driven bounce, a knee-jerk drop on the Fed’s tightening signal, and a late-week recovery as crude retreated.
• Canadian equities returned 0.34%², as August inflation landed on consensus and left rate-hike pricing intact, leaving a soft factory sales print, a weaker Loonie and choppy crude to set the tone.
• European equities finished -1.47%³ lower, pressured early by energy-led inflation worries and higher sovereign yields, steadied mid-week once U.K. price data and the Bank of England’s hold eased hike bets, before fading Friday.
• Emerging market equities were down -1.85%⁴, with Asia trading unevenly through the first half of the week before broad regional strength took hold Friday, even as the BoJ’s hike came with non-committal guidance.

Hawkish hike repriced the curve

U.S. Treasury yields pushed higher into midweek as elevated crude prices fed inflation expectations and markets converged on a near-certain Fed hike, with the 10-year briefly clearing 5% for the first time since 2023. Strong retail sales were absorbed without a front-end selloff, but Chair Warsh’s press conference did the damage, lifting 2-year yields sharply as the dot plot signalled more tightening and a higher longer-run rate. Duration then recovered as crude retreated. In Canada, inflation printed on consensus across headline and core, leaving Bank of Canada pricing untouched. U.K. gilts rallied on an in-line CPI print and a 6-3 hold, aided by the BoE’s decision to halt long-dated sales. Japanese yields eased from 3% after a less hawkish-than-expected BoJ.

• The 2- and 10-Year U.S. Treasury yields rose 17 basis points (bps) and 4 bps, respectively. In Canada, the 2- and 10-year sovereign yields were 1 bps and 7 bps lower, respectively. Bond yields and prices move inversely to one another.
• The week’s defining move was the front end, where Warsh’s “removed a dose of accommodation” framing drove 2-Year yield higher, while gilts decoupled and rallied on a dovish BoE hold.
• The first Fed hike since 2023 came with a dot plot showing sixteen of eighteen officials backing another move this year, and a longer-run rate nudged higher to 3.25%.

Canada’s inflation rate holds steady at 3% in August

Canada’s annual inflation rate remained unchanged at 3.0% in August, according to data released by Statistics Canada (StatCan), suggesting that while higher energy prices continue to pressure consumers, broader price pressures remain relatively contained. The Consumer Price Index (CPI) matched July’s 3.0% increase and was in line with economists’ expectations. On a monthly basis, consumer prices declined 0.1%, while seasonally adjusted prices rose 0.2%.

Highlights:

• StatCan said gasoline prices continued to be a major contributor to inflation, rising 22.8% year-over-year in August. However, that increase was slower than the 25.7% gain recorded in July, helping to offset upward pressure from other areas of the economy.
• Higher costs for travel tours, air travel and rent helped keep headline inflation elevated. Travel tour prices surged 26.1% from a year earlier, reflecting higher fuel costs and changes in travel patterns compared with last year. Rent inflation also accelerated, rising 2.8% annually.
• Canadians received some relief at the grocery store. Food prices increased 2.8% from a year ago, down from 3.1% in July and below the overall inflation rate for the first time in more than a year. Slower price growth for dairy products, pork and fresh fruit contributed to the moderation.

U.S. Federal Reserve raises rates as inflation concerns persist

The U.S. Fed raised its benchmark interest rate by a quarter percentage point, underscoring its determination to bring inflation back to its 2% target even as the economy continues to show resilience. According to the Federal Open Market Committee (FOMC), the target range for the federal funds rate was increased to 3.75%-4.00% in a unanimous 12-0 decision. In its policy statement, the Fed said economic activity is expanding at a solid pace, supported by resilient consumer spending, strong productivity growth and robust business investment. The move marks the first rate increase under Federal Reserve Chair Kevin Warsh, who took office earlier this year.

Highlights:

• Officials noted that labour market conditions remain healthy, however, policymakers emphasized that inflation remains elevated and continues to warrant a restrictive monetary policy stance.
• During his post-meeting press conference, Warsh said the U.S. economy has remained remarkably resilient despite geopolitical uncertainty and ongoing inflation pressures. He pointed to solid hiring, rising business investment and robust credit conditions as evidence that financial conditions were not overly restrictive.
• Updated projections released alongside the decision indicated that most Fed officials expect at least one additional rate increase before the end of 2026, reflecting concerns that inflation could take longer than expected to return to target.

European industry struggles and Bank of England holds rates steady

Europe’s economy continues to navigate a challenging environment marked by sluggish industrial activity and persistent inflation concerns. New data from Eurostat showed eurozone industrial production slipped 0.1% in July, matching the decline recorded in June, while output across the broader European Union fell 0.3%. Although annual production levels were broadly stable, the figures underscored the ongoing weakness in manufacturing after several years of soft demand. At the same time, the Bank of England (BoE) opted to leave its benchmark interest rate unchanged at 3.75%, balancing higher inflation driven by rising energy costs against signs of a still-fragile economy. Together, both highlight the difficult task facing policymakers as they seek to support growth while preventing renewed inflation pressures from becoming entrenched.

Highlights:

• Eurozone industrial production edged lower for a second consecutive month in July. Growth in energy output, capital goods and durable consumer goods was outweighed by a sharp decline in non-durable consumer goods production, reflecting uneven conditions across the industrial sector.
• Industrial output varied widely among EU member states. Luxembourg, Croatia and Ireland recorded the strongest monthly gains, while Denmark, Bulgaria and Lithuania posted the largest declines. Despite the monthly weakness, annual production levels were largely stable across the region.
• In its rate decision, the BoE cited rising inflation linked to higher energy prices and ongoing geopolitical tensions for its cautious stance. While policymakers noted that economic activity has been somewhat stronger than expected, they warned that persistently elevated energy costs could require tighter monetary policy if broader inflation pressures begin to build.