Global equity markets moved higher over the week ended July 5. Investors took an optimistic stance towards risk assets as the second half of 2024 began with expectations that tight financial conditions will ease. In a shortened trading week, Canadian and U.S. equities advanced. Yields on 10-year government bonds in Canada were largely unchanged, while those in the U.S. declined. Oil and gold prices both increased over the week.
Canadian economy loses jobs
The Canadian economy lost 1,400 jobs in June. This was the second month in the past four that the economy has lost jobs. The losses were concentrated in the full-time sector.
Economists were expecting the economy to add 25,000 jobs after adding 26,700 in May.
Canada’s unemployment rate rose to 6.4% in June, from 6.2% in May. This marked Canada’s highest unemployment rate since January 2022.
June’s results further reinforce recent signs the Canadian labour market is slowing.
With inflation also slowing and relatively soft economic growth, more rate cuts from the Bank of Canada seem likely this year.
U.S. job additions slow
The U.S. economy added 206,000 jobs in June, which was above estimates but below the 218,000 job additions in the previous month. The government added the largest number of jobs over the month. Notable job gains also came from the health care and construction industries.
The U.S. unemployment rate ticked higher to 4.1% in June, its highest level since November 2021.
Looking at the private sector, ADP reported that private businesses in the U.S. added 150,000 jobs in June, which was the lowest number of additions since January 2024. Hiring by private businesses is losing some momentum.
Adding to signs that the labour market might be cooling, job openings increased in May.
Immediately, the data raised expectations that the U.S. Federal Reserve Board would need to begin cutting interest rates, potentially as early as this quarter.
European inflation rate ticks lower
A flash estimate showed Europe’s inflation rate eased to 2.5% in June from 2.6% in May, which matched economists’ expectations.
The price growth for food and energy products moderated in June.
The core inflation rate, which excludes more volatile items, was unchanged at 2.9% in June, which was above expectations.
European retail sales rose by 0.1% in May, a relatively soft rebound from the 0.2% drop in April. Consumers continue to struggle amid the weight of tight financial conditions.
Inflation stayed elevated in June and remains a concern for European Central Bank (“ECB”) officials. The ECB is expected to drop interest rates again in 2024, but rate cuts are likely to be gradual.
Labour Party wins majority in U.K. election
The Labour Party has won the U.K. general election, obtaining enough seats to form a majority in Parliament.
This victory ends 14 years of the Conservatives being the primary governing party. The Conservatives navigated through some interesting times, including the COVID-19 pandemic and, notably, the U.K.’s exit from the European Union.
New Prime Minister Keir Starmer and his Labour Party have committed to fiscal sustainability. He plans to increase spending marginally, but also raise taxes. The plan could be constructive for economic growth. Still, as policy changes come into effect, the economic outlook could be cloudy.
In the near term, it is likely to have little impact on the Bank of England (“BoE”). The BoE’s policy interest rate currently stands at 5.25%, with growing expectations that it might be preparing to cut rates.
U.K. equity markets moved higher following the election before finishing lower on the day.
Comments