Weekly Market Pulse - Week ending August 16, 2024

Market developments

Equities: The S&P 500 is on a seven-day winning streak and ended with its best week of the year. The market has been boosted by cooling inflation and better than expected retail sales in the U.S. The CBOE Volatility Index has dropped to 15, indicating improved risk sentiment. Additionally, the yen carry trade is regaining popularity among hedge funds, as investors seek higher returns by borrowing the Japanese currency.

Fixed Income: Cooler inflation data raised hopes for interest-rate cuts from the Federal Reserve next month. Analysts from JPMorgan described the week's economic data as supporting a "Goldilocks narrative", suggesting a favourable economic environment. Fixed Income performance was muted this week and ended slightly positive in North America.

Commodities: Spot gold topped $2,500 an ounce for the first time this week, bolstered by expectations that the U.S. Federal Reserve is moving closer to cutting interest rates. Gold has gained more than 20% this year amid growing optimism over monetary easing and large purchases by central banks. The precious metal has also seen increased demand as a safe-haven asset due to rising geopolitical risks, including tensions in the Middle East and Russia's conflict with Ukraine.

Performance (price return)

Macro developments

Canada – No Notable Releases

No notable releases this week.

U.S. – U.S. Inflation Rate Falls to 2.9%, Retail Sales Jump by 1% in the U.S.

In July 2024, the U.S. annual inflation rate slowed to 2.9%, the lowest since March 2021, down from 3% in June. This marks the fourth consecutive month of easing, with notable decreases in shelter, transportation, and apparel costs. Core inflation also fell to 3.2%, reflecting broader moderation in price increases.

U.S. retail sales increased by 1% month-over-month in July 2024, the largest rise since January 2023. This sharp rebound follows a 0.2% decline in June and exceeded forecasts, driven by strong sales in motor vehicles and electronics, although some sectors like sporting goods and clothing saw declines.

International – U.K. Unemployment Drops to 4.2%, U.K. Inflation Edges Up to 2.2%, U.K. GDP Growth Slows to 0.6%, U.K. Retail Sales Increase by 0.5%, Eurozone GDP Grows by 0.3%, Japan's GDP Surges by 3.1%, China's Retail Sales Grow by 2.7%

The U.K.'s unemployment rate fell to 4.2% from April to June 2024, down from 4.4% in the previous period. This decline was due to a decrease in short-term unemployment and an increase in part-time and self-employed workers, although economic inactivity saw a slight rise.

The U.K.’s annual inflation rate increased to 2.2% in July 2024, up from 2% in June, driven by higher costs in housing, communication, and miscellaneous goods. However, core inflation eased to 3.3%, indicating mixed pressures across different sectors.

The U.K. economy grew by 0.6% quarter-on-quarter in Q2 2024, slightly down from 0.7% in Q1. Growth was driven by the services sector, particularly scientific research, while manufacturing and construction saw marginal declines. Household spending also showed modest gains.

U.K. retail sales rose by 0.5% in July 2024, recovering from a 0.9% decline in June. The increase was led by strong sales at non-food stores, particularly department stores and sports equipment, although food store sales remained flat and fuel sales declined.

The Eurozone's GDP grew by 0.3% in Q2 2024, consistent with the previous quarter. While key economies like France and Spain showed stable growth, Germany contracted by 0.1%, highlighting ongoing challenges in the region’s largest economy.

Japan's economy grew by 3.1% on an annualized basis in Q2 2024, exceeding expectations. This strong recovery was driven by a rebound in private consumption following significant wage increases and a recovery in business spending, particularly in the automotive industry.

China's retail sales increased by 2.7% year-on-year in July 2024, up from 2% in June. This growth was supported by higher sales of beverages, communication equipment, and sports articles, although some sectors like furniture and cosmetics saw declines.

As of August 16, 2024