Global equity markets declined over the week ended August 26 as investors waited for the highlight of the U.S. Federal Reserve Board’s (Fed) Jackson Hole gathering – Fed Chair Jerome Powell’s speech. Powell revealed that restrictive policy measures could be in place for some time. The S&P/TSX Composite Index declined, dragged by the Information Technology and Health Care sectors. In the U.S., the S&P 500 Index fell, pulled down by weakness in the Communication Services sector. Oil and gold prices moved higher. Yields on 10-year government bonds in Canada and the U.S. rose over the week.
Canada and Germany reach hydrogen accord
Canada and Germany agreed to a five-year hydrogen accord with the goal of establishing a transatlantic supply chain.
Canada aims to send the first deliveries of hydrogen produced by wind farms by 2025.
Prime Minister Justin Trudeau and German Chancellor Olaf Scholz signed the agreement in Newfoundland and Labrador, a province with strong wind power potential.
Germany hopes to reduce its dependence on Russian gas and other energy products while taking a clean approach.
Powell: Fed focused on moderating demand
The Fed’s annual summer symposium at Jackson Hole took place in person after two years of virtual meetings and focused on the fight against inflation.
Fed Chair Jerome Powell reiterated that the longer inflation remains high, the greater the chances are that it could become entrenched.
Longer-term inflation expectations remain well-anchored; however, he urged caution against loosening policy too early before prices stabilize sufficiently.
Powell highlighted that restrictive policy would likely remain in place for “some time” to moderate demand and bring down inflation.
Incomes rise as inflation eases
According to the U.S. Bureau of Economic Analysis, personal income rose 0.2% in July from June, below economists’ expectations of a 0.6% increase.
Private wages and salaries largely contributed to the sixth consecutive monthly rise.
Personal consumption expenditure (PCE) prices, the Fed’s preferred inflation measurement, rose 6.3% in July year-over-year but decreased by 0.1% on a monthly basis.
The core PCE index rose less than expected in July. Powell welcomed July’s lower inflation readings but emphasized the importance of seeing more than one month’s improvement.
European business activity contracts again
According to a preliminary estimate from S&P Global, business activity across Europe contracted in August, its second straight monthly decline.
The service sector expanded at its slowest pace since April 2021, with demand for services hindered by surging prices.
S&P Global’s eurozone Composite Purchasing Managers’ Index fell to 49.2 in August from 49.9 last month.
Manufacturing activity slowed for the second month, weighed down by weak new business and production.
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