Global Equity Weekly

September 08, 2023 | 16:45

Energy Fuelling Rate Worries

Economist

Senior Economist and Vice President
Economics

Carl Campus joined BMO Economics in 2007 as a Research and Technical Assistant; he was later promoted to his cur... (Read more)

Carl Campus

Senior Economist and Vice President
Economics

Carl Campus joined BMO Economics in 2007 as a Research and Technical Assistant; he was later promoted to his cur... (Read more)

It was a challenging week for global stocks, though the major indices in North America and Europe appeared to get some footing on Friday. Continued strength in oil prices has been one driver of the recent weakness, as it has fanned inflation concerns at a time when many major central banks hoped to be at or near the end of their rate-hiking campaigns. Notably, oil prices vaulted to their highest levels of the year, rising above the $87 mark following coordinated moves, announced on Tuesday, that will see Saudi Arabia and Russia extend current voluntary production cuts (1mb/d and 300kb/d, respectively) through year-end.

The S&P/TSX ended the week 2.3% below last Friday’s close, marking its fifth down week of the last six. On a sectoral basis, materials, telecom and technology led to the downside, while health care, energy and consumer stables saw more moderate losses.

The S&P 500 was a little higher up the equity market leaderboard, falling 1.3% this week. While the losses were fairly broad-based (outside of energy and utilities), technology was a notable underperformer, weighed by the Chinese government’s new restrictions on foreign-branded electronic devices (i.e., iPhones).

Central banking… Inflation worries were front and centre for the Bank of Canada as it moved to the sidelines this week, following two straight 25 bp hikes in June and July. While the Bank is likely done, the combination of an upturn in oil prices and sturdy wage growth will keep it from slamming the door on further moves. While the Federal Reserve is gearing up for its next monetary policy meeting in a couple weeks’ time, we’ll await cues from next week’s U.S. consumer inflation report, which has the potential to keep the Fed off the sidelines—currently, we’re expecting a skip/pause. Speaking of a pause, the European Central Bank is on deck next week, and the voting rotation and weaker data are favouring no move this time around. Still, with inflation metrics remaining uncomfortably high across the region, policy debates at the ECB are likely to heat up in the coming months.

Major Index Performance

North American Sector Performances

(% change over period)

Table 1 - S&P 500 Sector Performance

Source: BMO Economics, Bloomberg

Table 2 - TSX Sector Performance

Source: BMO Economics, Bloomberg

TSX Relative Sector Performance

(relative to the index, year-ago = 100; dashed line = 200-day m.a.)

S&P 500 Relative Sector Performance