FLASH Report – may 6^th – may 17^th, 2024

In a Nutshell: A sigh of relief in the markets as U.S. consumer prices increase by less than expected.  Core prices are being watched closely by the Fed and have become a focus for the markets rate cut expectations

U.S. Labour Markets

After rising the previous week, the number of Americans filing new claims for unemployment benefits fell last week, showing that the labour market remains robust.  However, the jobs market report showed that the U.S. added 175,000 roles in April, far below forecasts and the smallest uptick in six months, while the unemployment rate ticked up to 3.9%, which further indicates that some steam is coming out of the once red-hot jobs market in the world's largest economy. 

 

U.S. Economy

The U.S. economy cooled off this month as the CPI increased by 0.3% for the month, which was below expectations and bringing the annual rate to 3.4% from 3.5% in March.  However, producer prices had a slight uptick due mainly to elevated costs for services and goods, in a sign of lingering inflationary pressures early in the second quarter.  Markets are closely watching this data as it will highly impact the decision making of the federal reserve over the coming months.

 

Canadian Economy

The Canadian economy showed continued signs of slow growth despite labour markets remaining intact.  Canada’s unemployment rate remained unchanged from the prior month at 6.1% as employers also added 90,000 jobs in April, marking the largest employment gain in more than a year.  Canada's services sector contracted at a slower pace last month with S&P Global Canada services PMI headline business activity index rose to 49.3 from 46.4 in March, posting its highest level since June last year.

 

Eurozone and UK Economy

The Eurozone showed signs of continued recovery from the mild recession as the EU Composite PMI index and German Services PMI rose again this month for the highest readings since mid to early last year.  The UK showed similar encouraging signs with Gross Domestic Product (GDP) in the opening three months of 2024 came in at 0.6% on a quarter-on-quarter basis, a quicker rate than the 0.4% uptick economists had predicted.  Central banks will deeply consider rate cuts at upcoming policy meetings.

 

Reuters Market Updates http://www.reuters.com

Bloomberg Market Updates - https://www.bnnbloomberg.ca/markets

 

 

 

 

Market Data	S&P/TSX	S&P 500	DOW	NASDAQ	STOXX EU	WTI	GOLD
This Week	1.6%	1.9%	2.2%	1.1%	3.3%	0.2%	2.9%
Last Week	0.7%	1.5%	1.2%	2.1%	-0.1%	2.2%	1.9%

Market data taken from https://www.marketwatch.com/

 

 

CIBC Economics – Canadian Jobs by Andrew Grantham  

The 90,000 increase was well above the 20,000 expected by the consensus, although further strong population growth and a tick up in labour force participation meant that the unemployment rate only held steady at 6.1%.

Job growth during the month was led by professional & scientific, food & accommodation, and health care.  Overall employment gains were split fairly evenly between part-time and full time.

Overall, April's labour force data were certainly better than expected, although the underlying trend remains one of loosening conditions with the unemployment rate still higher than it was at the start of the year and wage pressures beginning to ease.

 

 

ECONOMIC FLASH! – US CPI: A good one, but the Fed will need to see more by Andrew Grantham  Link to Article

Based on the CPI inflation print on Wednesday, the market is pricing in 50 basis points of easing in 2024 with September and December being the key markers.

 

While owner's equivalent rent remained stable due to high single-family home prices, rental inflation is decreasing, which is likely to impact owner's equivalent rent as multi-family rental units become more influential in the overall shelter market.  Additionally, there is a possibility that the pace of this decrease could accelerate, especially considering the decline in market-based rental prices for apartments.

 

There are positive indicators in goods inflation trends as well.  Core goods prices are expected to remain in disinflationary territory, particularly due to imbalances in the used car market, which are still significantly higher than pre-pandemic levels. Additionally, other core goods prices are expected to remain soft, partly due to monetary policy and the abundant global supply of goods. The New York Fed Supply Chain Pressures Index has decreased, and the strength of the dollar is also contributing to this trend.

 

What it means:

Today's report is a good one for the Fed, but they will want to see more reports like this.  CIBC Economics still believes the Fed will ease twice this year - in September and December.

 

 

 

Why Gold and Copper Are Making Big Moves by Frank Holmes, U.S. Global Investors Link to Article

Geopolitical tensions have escalated, influencing global financial markets, and two commodities in particular have emerged as pivotal players: gold and copper.

Central banks, particularly in emerging markets, are increasing their gold reserves.  The first quarter of 2024 saw institutions purchase a record 290 tons of gold, according to the World Gold Council (WGC).  This is an unprecedented quantity and highlights a strategic shift toward the metal as a reserve currency and in lieu of the U.S. dollar.

Based on the above facts, investors may see gold as a reasonable option for diversification in a Balanced investment portfolio, in particular for those investors seeking to hedge against geopolitical risk and potential inflation.  Persistently strong demand from central banks further supports the investment case for the yellow metal.

 

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Aurie Wicks, CA, CPA, CFP     Tyler Quinn, CIM®, FCSI         Bram Houghton, CFA, CFP

Wealth Advisor                       Sr. Investment Advisor,           Investment Advisor

(403) 835 - 4785                      Portfolio Manager                  (403) 690 - 9376                                 

aurie.wicks@cibc.com           (403) 299 - 7356                      bram.houghton@cibc.com

                                                            tyler.quinn@cibc.com

 

 

 

 

Wicks Quinn Houghton Group are Investment Advisors with CIBC Wood Gundy in Calgary, Alberta, Canada. The views of Wicks Quinn Houghton Group do not necessarily reflect those of CIBC World Markets Inc.

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