Global equity markets declined over the week ended May 13 as reports of ongoing inflationary pressures in the U.S. raised expectations for further monetary tightening, and heightened concerns about a period of weaker economic growth. In Canada, the S&P/TSX Composite Index dropped, dragged down by the Health Care sector. In the U.S., the S&P 500 Index declined, while the tech-heavy NASDAQ Composite Index fell almost 3%. The price of oil ended largely flat, while the price of gold fell. Yields on 10-year government bonds in Canada and the U.S. ended the week lower.
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Rogers-Shaw deal in limbo
The mega-deal between Rogers Communications Inc. and Shaw Communications Inc. may be in jeopardy.
The Competition Bureau has reviewed the deal and will move forward to block the merger, citing competition and concerns about consumer choice. The regulator plans to file an application to the Competition Tribunal.
Rogers stated it intends to sell Freedom Mobile, which is currently owned by Shaw, but that may not satisfy regulator concerns.
Shares of both companies fell over the week.
Inflation higher than expected
U.S. consumer prices remain elevated. The U.S. inflation rate was 8.3% year-over-year in April, above the 8.1% rate economists expected.
It was slower than the March 8.5% increase, which was the sharpest pace since 1981.
A rise in gasoline prices contributed the most to the high inflation rate followed by higher food and new vehicle prices.
The higher-than-expected inflation rate fueled anticipation that the U.S. Federal Reserve Board will need to tighten policy aggressively to combat inflation.
Stable growth ahead
The Organisation for Economic Co-operation and Development (“OECD”) predicts economic growth may remain stable in many member countries, except for Europe and the U.K., where growth may weaken.
The OECD says leading indicators including consumer and business confidence and order data, point to stable growth across many member nations, despite the Russia‑Ukraine conflict and rising prices.
However, the situation is not the same in Europe and the U.K., where the negative impact of the conflict in Ukraine has been particularly acute.
The economic body says rising inflation and a weaker manufacturing sector may hinder growth in those two areas.
New lockdowns weigh on export growth
Growth in China’s exports slowed in April, largely due to a decline in production capabilities as new lockdown restrictions were implemented and may be suggesting a slowdown in economic growth.
Exports from China rose by 3.9% year-over-year in April, a significant slowdown from the 14.7% annual growth in March. The gain marked the first single digit increase in export growth since 2020.
Imports experienced no growth (0.0%) year-over-year in April.
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