Global equity markets ticked higher over the week ended March 25. Sentiment was relatively strong amid robust economic data, particularly out of the U.S. This offset concerns over the conflict in Ukraine, while the U.S. Federal Reserve Board (“Fed”) noted it may consider a 50 basis point (“bps”) rate increase at an upcoming meeting. In Canada, the S&P/TSX Composite Index posted a small gain, led by the Health Care sector. Canada’s main index reached a new record-high closing price during the week. In the U.S., the S&P 500 Index advanced, benefiting from the strong return of the Energy sector. Oil and gold prices both gained over the week. Yields on 10-year government bonds in Canada and the U.S. both finished higher.
Liberal minority buoyed until 2025
On Tuesday, Prime Minister Justin Trudeau announced that the NDP will support the minority Liberal government until 2025, in a supply-and-confidence agreement.
Under the agreement, the NDP will support the Liberals on budget and confidence votes and issues that the two parties agree should be prioritized.
These issues include affordability in Canada’s housing market, universal national pharmacare, dental care for low-income Canadians, and measures to improve care for children and seniors.
A surtax on financial institutions that profited during the pandemic is also an issue that both parties consider a priority.
Fed may quicken pace of rate hikes
The Fed raised the target range of its federal funds rate by 25 bps to a range of 0.25% to 0.50%, at its meeting last week.
In a speech to the National Association for Business Economics, Fed Chair Jerome Powell indicated the central bank may raise rates at a relatively quick pace this year to help combat rising inflationary pressures.
Powell acknowledged the possibility of a 50 bps interest rate increase at an upcoming meeting, rather than just 25 bps.
Canadian, U.S. bond yields climb
The yield on U.S. 10-year government bonds rose to 2.49% during the week, while the Canadian 10-year government bond yield rose to 2.55% in the week, a level not seen since 2018.
The higher yields reflect market expectations of higher interest rates ahead.
The Bank of Canada and the Fed both say interest rates will need to rise as inflation remains high.
Home prices rise sharply
Prices for new Canadian home prices rose by 1.1% in February compared to January 2022, according to Statistics Canada.
This was the sharpest monthly increase since May 2021.
The rise in prices came in response to robust demand, along with higher input costs in the construction of new homes.
Compared to the same month in the previous year, home prices rose by 10.9% in February.
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