(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

What happened last week?

• North American equities were flat on Monday, moved higher and peaked for the week on Tuesday, and then declined for three consecutive days.  The week culminated with losses of 1½ to 3½ percent on both Thursday and Friday.

• These declines, for the most part, anticipated and preceded major economic releases last week.  On Friday the latest Canadian Labour Force Survey and U.S. consumer inflation data was released.

• In May, the unemployment rate in Canada fell 0.1% reaching a new record low of 5.1%.  Employment rose by 40,000 when full-time work increased by 135,000 and part-time work fell 96,000.  Wages have risen 3.9% over the past year. (Source)

• The U.S. Consumer Price Index (CPI) rose 1.0% in May and the annual inflation rate sits at 8.6%.  Again, the sub-indexes for food and energy were major contributors to the overall inflation rate, rising 1.2% and 3.9%, respectively, during May.  The rise of these two categories is significantly higher than the increases experienced in April.  The inflation rate for “all items less food and energy” rose 0.6% in April and again in May, and this flattening was a small measure of positive news. (Source)

• In stark contrast is China’s CPI of 2.1% for May, which has been heavily influenced by strict Covid-19 controls.  “The modest price pressures also allow China’s central bank to release more stimulus to prop up the economy even as monetary authorities in most other countries scramble to hose down inflation with aggressive interest rate hikes”.  For example, the European Central Bank left its interest rates unchanged last week but intends to raise them by ¼ percent (25 basis points) in July. (Source₁, Source₂)

What’s ahead for this week?

• In Canada, April’s construction investment, manufacturing sales and new orders, new vehicle sales and wholesale trade will be announced along with May’s housing starts, home price index and industrial product and raw materials price indexes. 

• In the U.S., after last week’s CPI announcement the Producer Price Index and the Import and Export Price Indexes for May will be released.  The Federal Reserve’s Open Market Committee meets on Tuesday and Wednesday and will release a monetary policy update and economic projections on June 15th at 2 pm.

• Globally, inflation numbers will be announced across Europe with major economies like Germany and France reporting as well as the data for the Eurozone.  The Banks of England and Japan will announce interest rate decisions.

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