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6 mins
Stock markets and the economy

Publié le Mis à jour le

June 2023 - Markets welcome inflation data

The global stock markets recorded strong gains at the end of June. Investors were encouraged by data that indicated slowing inflation and were also hoping that the rate hikes were coming to an end. In their enthusiasm, they disregarded further warnings issued at the start of the month by central banks determined to curb inflation and they also ignored concerns about the potential impact on the global economy. For example, U.S. Federal Reserve Chair Jerome Powell reiterated in his testimony before Congress that rates could remain high longer and that further rate hikes could even be expected.

Férique
Closing
30-06-23
Variation vs
31-05-23
Variation vs
31-12-22
Interest rate in Canada (%)
Key rate
Key rate 4.75 0.25 0.50
Commodities ($ US)
Oil (WTI)
Oil (WTI) $69.56 2.2% -13.5%
Gold
Gold $1,922.20 -2.1% 6.1%
Currencies
EUR/CAD
EUR/CAD 1.44 -0.5% -0.1%
JPY/CAD
JPY/CAD 0.01 -6.0% -11.3%
USD/CAD
USD/CAD 1.32 -2.7% -2.3%

Sources: Bank of Canada, Fundata

CANADIAN MARKET

3.4% (S&P/TSX Composite 30-06-2023)

The Canadian stock market rebounded at the end of June after struggling at the start of the month. Even though the Bank of Canada raised its key interest rate by 25 basis points earlier in the month, the market rose in response to encouraging consumer price index (CPI) data that indicated inflation generally slowed in May on an annualized basis. The S&P/TSX Composite Index finished the month with a return of 3.4%. All sectors except Health Care and Utilities advanced during the period. The Financials sector was the main contributor.  

As for Canada’s bond market, it was relatively stable and ended the month where it started, as measured by the FTSE Canada Universe Bond Index. 

AMERICAIN MARKET

3.8% (S&P 500 30-06-2023 in CAD)

The U.S. market also ended strongly, with the S&P 500 Index returning 6.6% in U.S. dollars, its best monthly performance since the start of the year. The market also welcomed the slowing inflation in the United States and looked forward to the end of the monetary tightening cycle despite more warnings by the Fed Chair. All sectors, without exception, recorded gains for the period, with Information Technology and Consumer Discretionary leading the way. Even so, the loonie’s appreciation reduced the gains to 3.8% in Canadian dollars. 

EUROPEAN MARKET

2.0% (MSCI Europe 30-06-2023 in CAD)

The rebound on the North American markets was also felt on the other side of the Atlantic, despite the many challenges facing Europe. Inflation remained stubbornly high in the United Kingdom, with the market expecting further rate hikes by the Bank of England and the European Central Bank. Moreover, forecasts suggest that Germany’s growth will slow in the coming quarters. Even so, the MSCI Europe Index advanced 2.5% in local currencies and 2.0% in Canadian dollars. Consumer Discretionary and Financials were the main contributors, while Communication Services detracted from the return the most.

ASIAN MARKET

0.7% (MSCI Asia-Pacific 30-06-2023 in CAD)

The upward trend was also seen on the Asian market in June. The MSCI All Country Asia Pacific Index ended the month with a return of 4.5% in local currencies. Even so, the strength of the Canadian dollar against currencies such as the Japanese yen and the Australian dollar weighed heavily on the return, reducing it to 0.7% in Canadian dollars. Consumer Discretionary, Industrials and Materials posted the largest gains, while Health Care ended the month with a loss.

EMERGING MARKETS

1.1% (MSCI Emerging Markets 30-06-2023 in CAD)

The situation was similar for emerging markets. The MSCI Emerging Markets Index closed the month with a return of 3.5% in local currencies, but the currency effect reduced it to 1.1% in Canadian dollars. From the regional standpoint, Brazil, China and India were the main contributors to the return while South Korea and Taiwan detracted the most. From the sector standpoint, Consumer Discretionary and Energy recorded the largest gains. 

Reading in progress:June 2023 - Markets welcome inflation data

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