Monthly highlights of major events which drive financial markets, along with perspectives on what they mean and why they matter.
June In Review
In June, Canadian equities declined during the first half of the month, but partially recovered to finish the month down 1.42%. The decline in early June coincided with Statistic Canada’s Q1 labour productivity announcement, which showed a 0.3% decline in productivity, fueling ongoing concerns on the competitiveness of Canada’s labour market. Canadian bonds gained 1.13% as the Bank of Canada cut interest rates by 25 basis points (bps) – the first cut in over 4 years. In the U.S., equities advanced 3.59%, propelled higher by strong earnings among U.S. tech companies, particularly those with exposure to the Artificial Intelligence space. The U.S. Federal Reserve (the Fed) held rates steady in the face of a resilient U.S. economy and persistently elevated inflation, but policymakers hinted at the potential for an interest rate cut later this year.
Here are some of June's most notable macroeconomic headlines:
Consumer confidence dips. Despite a brief rise in retail sales following a three-month decline, Statistics Canada reported a 0.6% drop in May, suggesting the positive trend may not last. Tight financial conditions prompted the Bank of Canada to cut interest rates in June, as Canadian consumer confidence continued to fall. Similarly, the University of Michigan Consumer Sentiment Index continued its third straight monthly decline in June, reaching 65.6, the lowest since November 2023. Concerns over personal finances grew, despite a stable overall sentiment towards the U.S. economy.
Cautious optimism amid mixed economic signals. The Bank of Canada cut its overnight interest rate by 25 bps to 4.75% in June, its first reduction since 2020, aiming to bring inflation back to its 2% target amid slowing economic growth. While further rate cuts are widely expected in the coming months, caution remains due to ongoing inflation concerns. Inflation in Canada reached 2.9% in May, driven by higher food and healthcare costs despite lower gasoline prices. In the U.S., May economic indicators varied: expectations rose for medical care prices and fell for college education, with strong stock market sentiment. Despite core inflation dropping to 3.4%, the Fed maintained rates amid mixed economic activity and declining factory prices.
| Index† | Change (%) | Index Level | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Treasury Bill (FTSE Canada 60 Day T-Bill) | 0.38 | 2.53 | 5.54 | 182 |
| Bonds (FTSE Canada Universe Bond) | 1.13 | -0.38 | 3.73 | 1,117 |
| Canadian Equities (S&P/TSX Composite) | -1.42 | 6.06 | 15.96 | 21,876 |
| U.S. Equities (S&P 500, US$) | 3.59 | 15.29 | 32.77 | 5,460 |
| Global Equities (MSCI World, US$) | 2.07 | 12.04 | 28.13 | 3,512 |
| Emerging Marketings (MSCI Emerging Markets, US$) | 3.96 | 7.60 | 17.23 | 1,086 |
| Currencies† | Change (%) | Exchange Rate | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| C$/US$ | -0.38 | -3.19 | -0.77 | 0.73 |
| C$/Euro | 0.90 | -0.20 | -0.97 | 0.68 |
| C$/Pound | 0.40 | -2.46 | -2.33 | 0.58 |
| C$/Yen | 1.80 | 10.54 | 14.48 | 117.52 |
| Commodities (US$)† | Change (%) | Price | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Gold Spot ($/oz) | -0.26 | 9.92 | 12.05 | 2,340 |
| Oil WTI ($/barrel) | 6.27 | 13.74 | 24.91 | 81.54 |
| Natural Gas ($/MMBtu) | -2.29 | -3.56 | -21.01 | 2.60 |
†Total Return, as at June 30, 2024. Indices are quoted in their local currency.
Source: Bloomberg
Indices are not managed, and it is not possible to invest directly in an index.
U.S. economy continues to show resilience. According to the Chicago Fed National Activity Index, economic activity in the U.S. increased in May to 0.18 from -0.26 in April, exceeding economists' expectations. In the first quarter of 2024, the U.S. economy experienced a growth rate of 1.4%, albeit the slowest pace since contracting in the second quarter of 2022. Resilient economic performance, even amid tight financial conditions that has moderated the pace of consumer spending growth, has made it challenging for the Fed to begin pursuing interest rate cuts. Additionally, as reported by the International Monetary Fund, the U.S. has become a major destination for global investment, driven by higher interest rates that have supported a stronger U.S. currency in June and year-to-date.
Did you know?
In macroeconomics, productivity measures the efficiency of production, indicating how effectively an economy utilizes resources such as labor, capital, and technology to generate goods and services. Higher productivity contributes to economic growth, improved living standards, and global competitiveness. Influential factors include technological progress, investments in human capital through education and training, strong infrastructure, and efficient resource allocation. Key indicators like GDP per capita and labor productivity gauge economic performance, guiding policies aimed at sustaining long-term growth and stability globally. Check out the Perspectives Podcast, where Scotiabank’s Chief Economist Jean-François Perrault provides his perspective on Canada’s productivity .
