Global Equity Weekly

April 05, 2024 | 16:33

All That Glitters

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Equity markets were mixed this week alongside a heavy dose of economic data and Federal Reserve commentary. The S&P 500 dipped 1.0%, with health care, consumer staples and banks posting the deepest declines, while energy and telecom outperformed. Indeed, it was a strong week for resource stocks with oil and gold prices now making big runs. WTI oil prices pushed above $86, now up more than 20% since the start of the year, while gold has rallied 13%. This is, of course, music to the ears of the TSX which outperformed this week, up 0.4%. Materials and energy posted strong gains of 5.4% and 3.3%, respectively.

A raft of Fed speakers was out in full force this week, sending some mixed signals on the timing of potential rate cuts. Chair Powell largely stuck to the script, saying that “we do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent”. Some of the hawks questioned the need for rate cuts at all this year. As of late Friday, the market has now priced in a full fed rate cut only by September (although July is still very close).

On the data front, the U.S. economy continues to stand firm. The March payrolls report was the key piece of data this week, and it came in well ahead of expectations. Payrolls jumped by 303k in the month versus a consensus call of 200k. The unemployment rate fell a tick, to 3.8%, on the back of a rebound in household-survey jobs, while wage growth cooled slightly to 4.1% y/y. This, along with still-stubborn inflation pressure, is not the stuff rate cuts. Elsewhere, March PMIs were mixed, with the services sector cooling to 51.4 and manufacturing improving to 50.3. Both are now in expansion territory, albeit barely, and for the latter it marks the first such occasion in 17 months. Both new orders and production in manufacturing have returned to growth, even if employment remains weak.

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