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February 2023 - The pendulum swings back


marchésFebruary 2023 - After a strong start to the year, most of the global equity markets ended the month lower. January’s optimism fizzled out as investors realized that inflation was not slowing as much as they had hoped, especially in the United States. In response, they adjusted their expectations to reflect the possibility that interest rates will stay high for longer, a prospect that weighed on the markets.

Closing 28-02-2023 Variation vs 31-01-2022 Variation vs 31-12-2022
Interest rate in Canada (%)
Key rate 4.25 0.00 0.25
Commodities ($ US)
Oil (WTI) $76.84 -2.9% -4.5%
Gold $1,834.00 -5.7% +1.2%
Currencies CAD Variation CAD Variation
EUR / CAD 1.44 -0.4%
JPY / CAD 0.01 -2.7%
USD / CAD 1.36 +1.9%

Sources: Bank of Canada, Fundata.

(S&P/TSX Composite 28-02-2023)
In January, the Bank of Canada announced it was putting a “conditional pause” on rate hikes while it assessed changes in inflation and economic indicators. And, in fact, the economic data and the strong labour market accentuated the conditional aspect of the pause, which caused the Canadian market to decline. The S&P/TSX Composite Index returned 2.5% in February, with the Energy and Materials sectors detracting the most from the return.

Given the implications of the economic data, the Canadian bond market also suffered. The FTSE Canada Universe Bond Index returned -2.0% on the period.

(SP 500 28-02-2023 in CAD)
Comments by U.S. Federal Reserve policymakers and unexpectedly high inflation again weighed on the U.S. market. The S&P 500 Index ended the month with a -2.4% return in U.S. dollars. Even so, the strong greenback limited the losses, such that the return was -0.5% in Canadian currency. All sectors recorded losses, with the exception of Information Technology.

(MSCI Europe 28-02-2023 in CAD)
The European market stood out in February with a gain of 1.4%, in local currencies and in Canadian dollars, as measured by the MSCI Europe Index, which was buoyed by improved investor confidence. Financials, Industrials and Energy were the main contributors to the return, while materials and information technology detracted the most.

(MSCI Asia-Pacific 28-02-2023 in CAD)
The Asian market followed the trend of the North American markets and also closed out February with a loss. The MSCI All Country Asia Pacific Index ended the month with a return of -2.6%. The currency effect accentuated this negative return, increasing it to -3.9% in Canadian dollars. All sectors, without exception, ended the month lower.

(MSCI Emerging Markets 28-02-2023 in CAD)
The benchmark MSCI Emerging Markets Index ended the month with a -4.6% return, in local currencies and Canadian dollars alike. The decline was due mainly to the poor performance of the Chinese stock market, which was affected by a resumption of political tensions and disappointing preliminary economic data after the reopening of the economy.

Sources: Bank of Canada, FTSE International Limited, S&P Dow Jones Indices LLC and MSCI Inc.
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