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Market Reviews Monthly Review

February 2019 - The strong start to the year continues

While the oil price, interest rates and exchange rates were relatively unchanged in February, the stock markets continued the uptrend that began at the start of the year. The optimism persisted thanks to  such factors as China’s stimulative measures and glimmers of progress in the trade talks between China and the United States. The confirmation of a return to a more accommodative monetary policy by the U.S. Federal Reserve also contributed to the momentum.


The Canadian stock market maintained the upturn that began at the start of the year by recording a very strong month of February, with the MSCI Canada Index rising 3.1%. Financials, Energy and Information Technology were the main contributors to the result. As for the bond market, it was rather calm. The increase of a few basis points in the sovereign curve was detrimental, but a comparable tightening of credit spreads and the current yield provided a slightly positive return. 


Once again, the U.S. market’s performance was similar to that of the Canadian market, in terms of total return and main contributors. The MSCI USA Index returned 3.4% in local currency. The currency effect was negligible during the month, such that the result was a 3.6% gain when expressed in Canadian dollars. Information Technology, Industrials and Financials were the main contributors to the return. It should be noted that all sectors of the U.S. stock market had a positive return in February. 


The European bourses also had an excellent month. As measured by the MSCI Europe Index, the market was up 3.7% in local currencies. Like the U.S. dollar, Europe’s main currencies fluctuated very little against the loonie. The performance in Canadian dollars was therefore unchanged at 3.7% for the month. This market was undoubtedly the one where the sector contributions were the most equally distributed. That being said, the performance of Financials, Industrials and Health Care stood out during the period.


Apart from the significant fluctuation of its currencies, Asia’s performance was fairly similar to that of the other markets. As measured by the MSCI Asia Pacific benchmark index, the region returned 2.7% in local currencies. Even so, this strong performance was partially offset by the Canadian dollar’s appreciation against some of the region’s currencies, including the Japanese yen. As a result, the return was 1.8% in Canadian dollars. The best contributors included Financials, Consumer Discretionary and Information Technology.


Emerging markets, which are probably a barometer of lingering investor concerns, had a far more modest gain than did the developed markets. The MSCI Emerging Markets Index advanced 1.1% in local currenciesbut only 0.5% in Canadian dollars. For the second straight month, the Consumer Discretionary and Information Technology sectors contributed the most to the performance. 

Source: Bank of Canada and MSCI Inc.

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