(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 equity indices had a strong week Monday to Thursday, and Friday was almost as good as the preceding four days when the indices jumped 1.5 to 2.5% on the final trading day of the week.

• Although it was an exceptionally strong week for equities, not all the news was positive. Chrystia Freeland, the federal Finance Minister, warned that a domestic economic slowdown is expected in the coming months. She indicated that this is the natural consequence of the Bank of Canada’s interest rate increases enacted to attack inflation. (Source)

• Canadian consumer inflation was above expectations on a monthly and annual basis. Although inflation moderated slightly from 7.0% in August to 6.9% in September on a year-over-year basis prices increased in September by 0.4% on a seasonally adjusted basis. The decline in gasoline prices was largely responsible for moderating the monthly increase as price increases in other areas, like groceries, continued their trajectory. (Source)

• There is growing sentiment that the Federal Reserve and Bank of Canada are getting closer to the end of their rate-hiking cycle. The need to “front load” rate-increases, raising rates early to cause an effect sooner, is believed to reduce the overall negative effects by ending high inflation sooner. Another result as inflation begins to come under control is that future interest rate increases are reduced. Central banks continue to walk the fine line of slowing the economy to reduce inflation, while not dropping into a recession. (Source)

What’s ahead for this week?

• In Canada, after last week’s release of U.S. inflation indicators, the Canadian Consumer Price Index will be announced.  Building permits, housing starts, and retail sales are scheduled.  Also, the Bank of Canada will release its quarterly Business Outlook Survey.

• In the U.S., September’s capacity utilization, industrial production, manufacturing, building permits, housing starts, and existing home sales will be announced.

• Globally, in another round of what has been bad news for investors the Eurozone will release its CPI for September.  China will announce its retail sales imports, exports, trade balance, and house prices along with its Q3 Gross Domestic Product.  Japan, the world’s third largest economy, will also release its CPI.

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