August 2022 - Central banks vow to control inflation

MARKET REVIEWS

marchés August 2022 - Despite a rather positive start to the month, the stock markets again ended lower as a result of statements by the world’s major central banks. At the end of August, central bankers met for their annual symposium in Jackson Hole in the United States to discuss the high inflation that has been plaguing the world all year. In brief, they rallied around the simple message of a commitment to higher interest rates. In a much anticipated speech, U.S. Federal Reserve Chair Jerome Powell reiterated that interest rate hikes would continue at a steady pace to curb inflation, despite the implications for households and businesses, as well as the risks of a recession. On a more positive note, the price of oil continued the decline that began in June and fell back to its levels of early February.

	Closing 31-08-2022	Variation vs 31-07-2022	Variation vs 31-12-2021
Interest rate in Canada (%)
Key rate	2.50	0.00	2.25
Commodities ($ US)
Oil (WTI)	$88.89	-9.9%▼	18.0%▲
Gold	$1,715.90	-2.1%▼	-5.0%▼
Currencies		CAD Variation	CAD Variation
EUR / CAD	0.76	-0.7%▼	8.9%▲
JPY / CAD	105.82	1.6%▲	15.3%▲
USD / CAD	0.76	-2.2%▼	-3.4%▼

Sources: Bank of Canada, Fundata, US Energy Information Administration.

CANADIAN MARKET -1.9%▼ (MSCI Canada 31-08-2022)
In response to the announcements by the world’s banks, the Canadian market ended the month lower, albeit without completely offsetting the gains made in July. The MSCI Canada Index returned -1.9% in August. Even though most sectors ended the month in negative territory, Materials, Consumer Discretionary and Health Care contributed positive returns. Conversely, Industrials, Information Technology and Financials detracted from the return the most.

U.S. MARKET -1.8%▼ (MSCI Canada 31-08-2022)
The situation was similar in the United States, where the market was once again undermined by expectations of interest hikes and the spectre of a recession. The MSCI USA Index ended the month with a return of -3.9% in U.S. dollars. The greenback’s strength against our currency reduced the loss to -1.8% in Canadian currency. All sectors declined during the month, except Energy and Utilities. Consumer Discretionary, Health Care and Information Technology were the weakest performers.

EUROPEAN MARKET -4.2%▼ (MSCI Canada 31-08-2022)
The decline was also pronounced in Europe, where a major energy crisis pushed up the already high inflation. The European market returned -3.9% in local currencies during the period, as measured by the MSCI Europe Index. The currency had a negligible effect on the return in Canadian dollars, which was -4.2% for the period. Only the Energy sector had a positive return in August, driven mainly by Europe’s rising natural gas prices. Real Estate, Information Technology and Industrials recorded the largest losses in absolute terms.

ASIAN MARKET +0.9%▲ (MSCI Canada 31-08-2022)
The Asian markets diverged from the Western markets with a 1.3% gain in local currencies, as measured by the MSCI All Countries Asia Pacific Index. Currency fluctuations had little effect on the return in Canadian dollars, which was 0.9% for the period. Most sectors ended the month in positive territory, led by Energy, Utilities and Consumer Discretionary. The only sectors that recorded a loss during the period were Information Technology and Real Estate.

EMERGING MARKETS +2.7%▲ (MSCI Canada 31-08-2022)
Emerging markets also stood out during the month. The MSCI Emerging Markets Index ended the month with a 1.2% return in local currencies. In Canadian dollars, the index advanced 2.7%, its best monthly performance since the start of the year. From the regional standpoint, India, China and Brazil contributed the most to the return, in contrast to South Korea and Poland, which had the greatest negative impact. As for sectors, Financials and Consumer Discretionary contributed the most to the return, while Information Technology subtracted the most.