Last Week in the Markets: February 12^th – 16^th, 2024

What happened last week?

In a reversal of the preceding two weeks, the TSX gained ground last week, while the U.S. indexes lost value.  Over this three week period Canadian stocks have not performed as well as their American peers, but the most recent session delivered a welcome result for investors concentrated in Canadian equities.

The relatively poor performance in the U.S. last week can be attributed to two economic releases showing inflation is more persistent than expected.  Inflation rates have the likelihood of imminent interest rate reductions fading.

Consumer prices rose 0.3% in January, higher than the 0.2% seen in December, and the year-over-year inflation rate is 3.1%.  Food, shelter, healthcare, transportation, and electricity rose above the monthly aggregate increase, while used vehicles and energy and gasoline prices fell.  The Producer Price Index, that tracks the prices domestic producers receive for their output, rose 0.3% in January after declining 0.1% in December. BLS CPI release  BLS PPI release CNBC CPI and rates CNBC and PPI 

According to the CME Fed Watch tool the market is pricing-in a 90% likelihood that rates will be unchanged at the next Federal Reserve announcement on March 20^th.  The Bank of Canada is scheduled to deliver its next monetary policy on March 6^th, which could signal the Fed’s intent two weeks later.

The European Union, which represents about one-sixth of the world’s economy has forecasted that inflation will fall faster, and economic output grow more slowly in 2024.  This is the same forecast that is desired in the Canada and the U.S.  Once this occurs with consistency and predictability central banks will begin lowering rates.  The rate of inflation relies heavily on the price of energy, and instability caused by tensions in the Middle East persist.   EU forecast

What’s ahead for this week and beyond?

In Canada, markets are closed on Monday for Family Day in Ontario (observed by various names in other provinces and territories).  The Consumer Price Index (CPI), Producer Price Index (PPI), raw materials prices, new housing price index, and retail sales will arrive during a shortened, but busy week for economic announcements.

In the U.S., U.S. markets are also closed on Monday for Presidents Day.  Mortgage rates, mortgage market index and refinance index, and existing home sales will be reported.

Globally, the European Union will release its consumer confidence data, Harmonized Index of Consumer Prices (HICP).  China will report its housing prices.