Global equity markets finished largely flat over the week ended August 5 as investors parsed through corporate earnings results and economic data, trying to determine where global economies are headed. In Canada, the S&P/TSX Composite Index posted a drop, hindered by weakness in the Energy sector. In the U.S., the S&P 500 Index advanced, led by the Information Technology sector. Oil prices fell markedly, while the price of gold ended slightly higher. Yields on 10-year Canada and U.S. government bonds rose over the week.
Jobless rates remain relatively low
Statistics Canada data revealed the Canadian economy shed jobs for a second consecutive month, losing 30,600 jobs in July, which disappointed economists estimating 15,000 job additions.
Still, Canada’s unemployment rate remained at 4.9% in July, unchanged from June.
The labour force participation rate also fell during the month as more people exited the workforce.
In the U.S., the economy added 528,000 jobs in July, boosted by 96,000 job additions in the leisure and hospitality industry.
The U.S. unemployment rate ticked lower to 3.5% in July, from 3.6% in June. It is the lowest unemployment rate since February 2020, just before the beginning of the pandemic.
Largest rate hike since ‘95
The Bank of England (“BoE”) raised its key interest rate at its sixth consecutive meeting.
Marking its highest rate increase since 1995, the BoE hiked its Bank Rate by 50 basis points to 1.75%, citing surging inflationary pressures likely to persist.
In its outlook, the BoE carried a relatively cautious stance. The central bank projected the inflation rate to reach 13% in October, with high rates expected to continue over 2023.
The BoE expects the U.K. economy to fall into a recession by the end of 2022, with weak economic conditions over the following five quarters.
OPEC+ production increase disappoints
At its August meeting, the Organization of the Petroleum Exporting Countries and its allies (“OPEC+”) decided to increase production by 100,000 barrels per day in September.
U.S. President Joe Biden’s efforts to advocate for a substantial increase were not enough, disappointing market participants hoping for more.
In July, OPEC+ increased production by 310,000 barrels per day, falling well short of its planned 648,000 barrels. Some members of the oil cartel are experiencing capacity constraints.
Oil prices finished lower over the week.
Signs of a slowdown in Europe
Recent data releases out of Europe may indicate a slowdown in economic activity despite the region’s second-quarter expansion.
Retail sales slipped by 1.2% in June, the largest drop since December 2021. Economists estimated no change in retail sales during the month (0.0%).
Service sector activity across Europe continued its descent, falling for the third straight month, according to the S&P Global Eurozone Services Purchasing Managers Index. The sector was hindered by a drop in new business and exports.
Surging prices, higher interest rates, energy supply and the conflict in Ukraine are weighing on Europe’s economy.
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