Your weekly commentary – For the week ended June 16Global equity markets advanced over the week ended June 16 as investors considered implications from the U.S Federal Reserve Board’s decision to pause its cycle of interest‑rate increases. The S&P/TSX Composite Index rose, supported by the Consumer Discretionary and Information Technology sectors. U.S. equities, as measured by the MSCI USA Index, gained. Yields on 10-year government bonds in Canada and the U.S. moved higher. Oil prices rose over the week, while gold prices fell.Robust first quarter for Canadian restaurants
According to Statistics Canada, the restaurant industry generated first-quarter 2023 revenue comparable to pre-pandemic levels in the first quarter of 2019.
Restaurants play a crucial role in the economy, helping to drive the Retail sector.
Although retail food sales declined, food services as a percentage of total food sales also returned to pre-pandemic levels.
The data suggests consumers are returning to pre-pandemic dining-out habits.
Despite generating similar revenue to the first quarter of 2019, the restaurant industry operated with 100,000 fewer employees, including accommodation sites.
Fed holds steady as expected
In a widely anticipated move, the Fed maintained the federal funds rate target at 5%‑5.25%.
Fed Chair Jerome Powell remarked that the tight labour market was showing signs of balancing.
Despite overall inflation slowing to 4% last month, the core rate remained at 5.3%, well above the Fed's 2% target.
Many Fed officials believe additional interest-rate increases might be necessary in 2023.
Policymakers will also closely monitor the credit environment, especially to see whether any stress lingers in the banking sector.
ECB raises by 25 basis points
The European Central Bank (ECB) raised interest rates by 25 basis points during its June meeting.
The interest rate on its main refinancing operations reached 4%, the highest since the 2008 crisis.
The deposit facility rate increased to 3.5%, the highest in 22 years.
ECB President Lagarde stated the central bank would likely continue raising rates in July since measures on inflation indicated that it remained too far in excess of the ECB’s 2% target.
Inflation in the eurozone for May was 6.1%, although it has been easing. Lagarde also noted the central bank was not considering a pause.
IEA expects slower global oil demand
The International Energy Agency (IEA) expects the transition from fossil fuels to be accelerated by high oil prices.
Oil consumption in 2024 is expected to grow at half the rate of the previous two years.
Electric vehicles may contribute to the decline in oil use by cars, limiting oil demand this decade.
Global oil markets continue to readjust after disruption from the COVID-19 pandemic and the Russia-Ukraine conflict.
Expectations point to a potential tightening of global oil markets in the short term, with production cuts by OPEC+ counterbalancing increases in supply.
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