By Mike Keerma
The major U.S. and Canadian stock indices posted strong weekly gains,
despite softer U.S. inflation and retail sales reports. Both
crude oil also rose on the week, as the U.S. dollar faded on soft inflation and
retail sales data. Toronto’s benchmark
S&P/TSX Composite Index advanced 1.0% on the week, fueled by a 5.1% weekly gain in the price of
crude oil, a 1.3% rise in the price of gold. The
Canadian dollar continued to climb against the U.S. dollar, closing the week at US$0.7905,
as the Bank of Canada hiked its policy rate to 0.75%. The blue-chip U.S.
S&P 500 Composite Index climbed 1.4% on the week, closing at a record high on Friday, while the
Nasdaq Composite Index closed just shy of its record, gaining 2.6% on the week.
U.S. inflation remained flat on the month in June, with the annual rate for
the broad consumer price index holding at 1.6%. Core prices, which exclude
volatile food and energy prices, also remained unchanged in June at 1.7%.
Federal Reserve Board Chairwoman Janet Yellen alluded to the current
weakness in prices in remarks to Congress earlier in the weak, suggesting
the the Fed may wait for signs of stronger inflation and consumer demand
before pulling the trigger on another rate hike. Many analysts believe that
won’t happen until December.
U.S. retail sales dropped -0.2% in June from May, suggesting that stronger
household incomes have not yet stimulated consumer demand at the retail
The Bank of Canada, meanwhile, raised its target overnight rate by 25 basis
points, to 0.75%, pointing to stronger wage growth and better-than-expected
job creation as factors likely to underpin inflation ramping up to the
Bank’s 2% target sometime in 2018. Current inflation alone does not account
for the Bank’s move, as the core rate at 1.4% in May is still well below
the BoC’s target.
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