North American Economy Cooling
At the close of business last Friday, global equities finished marginally higher for the week. The yield on the US 10-year note, at 3.47%, was lower than a week ago while the price of a barrel of West Texas Intermediate crude oil fell $2.82 to $75.12. Volatility, as measured by the CBOE Volatility Index (VIX), was flat at 17.2, near its December 2021 lows.
CANADIAN ECONOMIC NEWS
Our central bank expects growth to weaken over the rest of 2023. TD Bank is the most shorted bank stock in the world as hedge funds have bet billions that the bank’s current share price will fall. In talking with your fund managers, there is little concern.
US ECONOMIC NEWS
With about 47% of the constituents of the S&P 500 Index having reported for Q1 2023, blended earnings per share shows that earnings declined 4.2%. Consumer-oriented companies have boasted about their ability to pass higher prices along to consumers, particularly in the food and beverage sector.
This next week is jam-packed, with three important things to watch: One is the Federal Reserve’s decision on interest rates on Wednesday. Two, Apple’s earnings report on Thursday, and three, the jobs report on Friday.
The US House of Representatives passed a bill raising the nation’s debt ceiling while cutting spending. The vote was 217 to 215, with four GOP representatives voting against it. The measure has no prospect of passage but puts pressure on President Joe Biden to come to the negotiating table. Biden said on Wednesday that he is willing to meet with Speaker of the House Kevin McCarthy over the debt limit but said that not raising the limit is off the table. Joe Biden also announced this week that he is running for reelection.
The US economy grew more slowly than initially projected, according to revised data reported on Thursday. The economy expanded at a 1.1% pace in Q1, down from an initial reading of 2.6%. Consumer spending was revised down modestly. Business investment and falling inventories were the main detractors.
Troubled California-based lender First Republic Bank is up for auction with at least six larger banks putting in bids for the troubled lender. The winner is expected to be announced later today.
EUROPEAN ECONOMIC NEWS
Sweden’s Riksbank raised rates 50 basis points to 3.50% and said it is likely to hike rates an additional 0.25% in coming meetings.
The IMF has recommended that the European central bank keep raising interest rates through mid-2024 in order to stem persistent inflation.
JAPAN, CHINA and EMERGING MARKETS ECONOMIC NEWS
New Bank of Japan Governor Kazuo Ueda said this week he wants to see strong inflation before adjusting the central bank’s yield curve control policy.
President Xi Jinping of China and President Volodymyr Zelensky of Ukraine spoke by phone on Wednesday for the first time since the outbreak of Ukraine’s war with Russia. According to China’s foreign ministry, Xi promised to send a representative to talk to all parties about reaching a political settlement of the war.