Monthly highlights of major events which drive financial markets, along with perspectives on what they mean and why they matter.

Both Canadian and U.S. equity markets retraced some of their recent gains in April, ending the month 1.81% and 4.08% lower, respectively. Simultaneously, fixed income markets also declined with the FTSE Canada Universe Bond Index falling 2.00%. Higher-than-expected inflation figures and the growing likelihood that central banks, particularly in North America, will maintain higher interest rates for an extended period dragged markets lower, pouring some cold water on the recent equity market rally and extending declines in bonds for the year. Amid a more cautious market sentiment, the energy (+1.08%) and materials (+5.92%) sectors stood out as top performers in Canada, while the remaining nine sectors faced declines. The strength of commodities, particularly gold (+2.88%) and copper (+13.01%), further underscored the market sentiment. In the U.S., only the Utilities (+1.65%) sector advanced with the remaining 10 sectors falling. Emerging markets produced a small gain of 0.43% month-over-month.

Here are some of April's most notable events: 

The Bank of Canada (BoC) maintained its benchmark overnight interest rate at 5.00% to combat persistent inflationary pressures. The BoC emphasized the need for concrete evidence of inflation moderating towards its 2% target before moving forward with rate cuts. Inflationary risks were highlighted, particularly due to rising commodity prices. Although headline inflation rose, core inflation indicators softened, potentially paving the way for interest rate reductions later in the year. BoC officials, as revealed in meeting minutes, remain cautious about rate cuts, with diverging views on the timing based on economic resilience and external influences from the U.S. economy.

Canada's manufacturing sector extended its decline for its 11th straight month. The S&P Global Canada Composite Purchasing Managers Index dropped to 47.0, signaling an overall contraction in economic activity. Despite a slower pace of decline compared to prior months, this ongoing weakness in a vital economic sector was largely fueled by reductions in new orders and output, impacting both manufacturing and services industries adversely. However, there was a bright spot in the form of Canada's manufacturing sales, which experienced their strongest growth since November 2023. In contrast, wholesale sales remained stagnant since August 2023, suggesting subdued demand in that sector.

Index 1 Mth Change (%) YTD 1 Yr Index Level
Treasury Bill (FTSE Canada 60 Day T-Bill) 0.46 1.70 5.40 180
Bonds (FTSE Canada Universe Bond) -2.00 -3.20 0.06 1,085
Canadian Equities (S&P/TSX Composite) -1.81 4.68 11.95 21,715
U.S. Equities (S&P 500, US$) -4.08 6.04 24.56 5,036
Global Equities (MSCI World, US$) -3.67 5.01 21.12 3,305
Emerging Marketings (MSCI Emerging Markets, US$) 0.43 2.89 9.01 1,046
Currencies 1 Mth Change (%) YTD 1 Yr Exchange Rate
C$/US$ -1.73 -3.88 -1.89  0.73
C$/Euro -0.57 -0.50 -0.28 0.68
C$/Pound -0.67 -1.99 -3.15 0.58
C$/Yen 2.48 7.73 16.55 114.54
Commodities (US$) 1 Mth Change (%) YTD 1 Yr Price
Gold Spot ($/oz) 2.88 9.07 10.33 2,303
Oil WTI ($/barrel) -0.59 13.60 15.02 81.93
Natural Gas ($/MMBtu) -0.30 -20.96 -40.95 1.99

Total Return, as at April 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.

Employment data for the U.S. revealed that the economy added 303,000 jobs in March. This marks the highest number since last May and significantly surpassed economists' expectations of 214,000 jobs. This substantial job growth contributed to the decline in the U.S. unemployment rate to 3.8%. The strong performance of the U.S. labour market has influenced the Federal Reserve's decision to maintain steady interest rates in recent meetings, especially in light of ongoing inflationary pressures and the resilience of the job market. Given the elevated inflation levels and the robust labour market, the Federal Reserve might postpone interest rate cuts.

Did you know?

Real vs. nominal GDP – what’s the difference? Real GDP adjusts for price changes over time, often providing a more accurate measure of economic output compared to nominal GDP, which uses current dollar values without accounting for inflation. Real GDP neutralizes inflation or deflation effects by using a base year's prices, allowing for meaningful comparisons of economic performance across time and regions. It captures variations in the quantity of goods and services produced, making it essential for evaluating living standards, economic growth rates, and overall economic health independently of price fluctuations.