July 2021 - The Chinese slowdown affects the entire Asian market

MARKET
REVIEWS

JULY 2021 - Regional disparities came to the fore during the past month. While the developed markets of America and Europe continued to advance, Asia was adversely affected by China’s slowing growth. After rising for several months, the price of oil stabilized and curtailed the energy sector’s momentum. The Canadian dollar again depreciated against many foreign currencies, while gold rebounded, probably helped by a return of investor appetite for safe havens.

	Closing 31-07-2021	Variation vs 30-06-2021	Variation vs 31-12-2020
Interest rate in Canada (%)
Key rate	0.25	0,00	0,00
Commodities ($ US)
Oil (WTI)	$73.93	▲0.6%	▲52.9%
Gold	$1,825.75	▲3.6%	▼-3.3%
Currencies		CAD Variation	CAD Variation
EUR / CAD	0.68	▼-0.6%	▲5.4%
JPY / CAD	88.03	▼-1.7%	▲8.4%
USD / CAD	0.80	▼-0.5%	▲2.1%

Sources: Bank of Canada, Federal Reserve Bank of St-Louis, US Energy Information Administration.

Canadian Market ▲0.8 % (MSCI Canada 31-07-21)
Despite the energy sector’s mediocre performance, the Canadian stock market remained in positive territory during the month. As measured by the MSCI Canada Index, it recorded a gain of 0.8% in July. The sectors that contributed the most included consumer staples, real estate and materials. Conversely, health care and consumer discretionary, like the energy sector, detracted from the result. The bond market once again ended the month slightly higher, thanks to the contribution of the current yield as well as lower medium- and long-term interest rates.

American Market ▲3.2 % (MSCI USA 31-07-21 in CAD)
The U.S. market led the way as the summer began. As in the previous month, a favourable exchange rate effect improved its performance in Canadian dollars. As measured by the MSCI USA Index, it returned 2.4% in local currency and 3.2% in Canadian dollars. From a sectoral standpoint, real estate, health care and utilities were the main contributors. It is also worth noting that almost all sectors advanced, with only the energy sector ending the month in the red.

European Market ▲2.7 % (MSCI Europe 31-07-21 in CAD)
The European market also got off to a good start this summer. As in the United States, only the energy sector subtracted value. The best performers included information technology, real estate and materials. As measured by the MSCI Europe Index, the return was 1.5% in local currencies and 2.7% in Canadian dollars. The euro, the pound sterling and the Swiss franc all appreciated against the loonie.

Asian Market ▼-4.2 % (MSCI Asia-Pacific 31-07-21 in CAD)
Growing concerns about the impact of the tightening of Chinese monetary conditions earlier this year were justified. The economic indicators signalled slowing growth, which spread to the region’s trading partners. As a result, the benchmark MSCI Asia-Pacific Index returned -4.8% in local currencies. The Canadian dollar’s weakness against some of the Asian currencies helped slightly, such that, in Canadian dollars, the return was -4.2% for the region. The materials sector was the only one with a positive return in local currencies.

Emerging Markets ▼-5.9 % (MSCI Emerging Markets 31-07-21 in CAD)
With significant exposure to Asia, the performance of emerging markets was also affected by the situation in China. As measured by the MSCI Emerging Markets Index, the return was -6.1% in local currencies and -5.9% in Canadian dollars. Once again, the materials sector was the only one with a positive performance. Real estate, consumer discretionary and utilities in particular detracted from the return.