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The week in the markets –
October 11, 2024
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Stubborn U.S. inflation could impact rate cuts
- New U.S. Consumer Price Index data put inflation back into focus.
- The Canadian dollar was put under pressure.
- Chinese-based equities fell flat after a disappointing fiscal package announcement.
Investors received fresh inflation data this week, with the U.S. Consumer Price Index (CPI) for September rising 2.4% year-over-year, slightly above the expected 2.3%. This suggested that U.S. inflation remains somewhat persistent. The U.S. Federal Reserve (the Fed) is set to meet in a few weeks, and while investors were hoping for another significant cut to the federal funds rate, the outlook appears tempered. Although inflation is trending downward in the U.S., it’s our expectation the Fed will implement only a quarter-percentage-point cut at its next meeting.
This situation could spell trouble for the Canadian dollar. If the Fed opts for a smaller interest rate cut than the expected 0.5% reduction from the Bank of Canada, the Canadian dollar may weaken against the U.S. dollar. Our model indicates that the Canadian dollar's fair value could fall to the US$0.70-0.72 range. For further insights, be sure to listen to this week’s IG Living Market podcast.
In China, the National Development and Reform Commission (NDRC), the country's economic planning agency, followed up on the recent stimulus package, but the response was underwhelming. Chinese equities fluctuated in reaction to the announcement of a modest 200 billion yuan (US$28 billion) in spending for next year, which fell far short of estimates that had projected a fiscal package worth as much as 3 trillion yuan. Notably, Chinese equities have since given back much of the gains made following the initial stimulus announcement a few weeks ago.
This week's market closing value - week ending October 11, 2024
(As of 4:00 PM ET.*)
| EQUITY INDICES | Level | Change | WTD | YTD | 1-year | 5-year |
| CAD | CAD | CAD | CAD | |||
| S&P/TSX | 24,469.02 | 316.49 | 1.31% | 16.74% | 24.44% | 8.31% |
| S&P 500 | 5,817.22 | 73.90 | 2.69% | 26.58% | 34.56% | 15.34% |
| DJIA | 42,863.86 | 511.11 | 2.61% | 18.09% | 28.37% | 10.75% |
| FTSE 100 | 8,253.65 | -26.98 | 0.58% | 13.60% | 16.36% | 4.16% |
| CAC 40 | 7,577.89 | 36.53 | 1.48% | 3.33% | 10.76% | 6.66% |
| DAX | 19,373.83 | 252.90 | 2.33% | 18.95% | 30.62% | 9.83% |
| Nikkei | 39,605.80 | 970.18 | 3.64% | 16.20% | 25.54% | 6.58% |
| Hang Seng | 21,251.98 | -1,484.89 | -5.31% | 30.07% | 20.99% | -3.20% |
| CURRENCY RETURNS |
CAD | Change | WTD | YTD | 1-year | 5-year |
| US$ | 1.3762 | 0.0188 | 1.39% | 3.83% | 1.24% | 0.83% |
| Euro | 1.5048 | 0.0148 | 0.99% | 2.85% | 4.24% | 0.63% |
| Yen | 0.0092 | 0.0001 | 1.10% | -1.82% | 1.23% | -5.41% |
| CANADIAN TREASURIES | Yield | Change | COMMODITIES | USD | Change |
|---|---|---|---|---|---|
| 3-month | 3.84 | -0.07 | Oil | $75.59 | $1.12 |
| 5-year | 2.98 | -0.03 | Gold | $2,656.31 | $4.88 |
| 10-year | 3.22 | 0.02 | Natural Gas | $2.63 | -$0.21 |
| CANADIAN PRIME RATE |
|---|
| 6.45% |
*The data contained in the charts above is provided by Bloomberg as of 4:00 PM ET. Please note that the final closing market values may vary due to data delays and market settlement.
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