Banks were among the leaders this week, gaining 6.5% after getting walloped by a flatter yield curve last week. Ten-year Treasury yields backed up 10 bps to 1.53%, which helped provide some relief to the group. Energy was also strong, rallying 6.7% on continued firmness in oil (WTI closed the week around $74) ahead of next week’s OPEC+ meeting. All other sectors posted gains, with defensives at the back of the pack.
The U.S. economic data were on the sluggish side this week, even as the market eyes broader reopening. Personal spending volumes slipped 0.4% in May, while core PCE inflation accelerated to 3.7% y/y, the fastest clip since 1992 (though with base effects adding). Home sales also faded further in the month as the most ravenous demand seems to be behind us. That said, supply is still tight and pushing up prices quickly. And, jobless claims dipped in the June 19th week ahead of a potentially very interesting payrolls report next Friday. The second-half outlook continues to look very strong, but it could start to be characterized by more rotation out of things like goods and housing (which have been terrifically strong) back into services and travel.
Meantime, the TSX underperformed this week, adding a more modest 1.2%. The underperformance was broad based, with energy and banks, for example, lagging their U.S. peers. On the year, Canada is still ahead by 2 ppts, but the index has lost ground over the past three months. Is this is as good at it gets for Canada? Banks have surged on economic reopening, a steeper yield curve and strong capital markets activity. Energy has been on a tear alongside the rally in oil prices. Combined, that’s half the index right there.