HIGHLIGHTS OF THE WEEK – Jan 19
Financial markets were volatile this week, as concerns about falling inflation and subdued global growth continued to weigh on investors’ sentiment. The U.S. equity fear gauge, known as the VIX, rose by 22%, equities sold off, while safe-haven assets rallied.
In addition to these familiar worries, market confidence was further tested by the disappointing U.S. advance retail sales report. The headline number declined by 0.9% m/m in December, far worse than the consensus forecast, while core sales fell by 0.3% m/m. However, an upbeat consumer confidence report from the University of Michigan helped to brighten the mood on Friday.
WTI prices briefly moved above US$50/barrel, but ultimately posted another week of losses. In turn, falling energy prices continued to exert a downward pressure on inflation, with headline and core CPI sliding to 0.8% y/y and 1.6% y/y, respectively, in December.
It was a down week for the Canadian economy. Oil prices remained near five year lows, while Target announced that it would be laying off more than 17 000 workers.
Weak oil prices continue to negatively feed through to the economy, as housing activity decelerated sharply on a monthly basis, with the largest declines seen in regions with large exposures to commodity markets. Similarly, business sentiment fell sharply in these regions, with lower investment and hiring intentions.
All eyes will be on the Bank of Canada in the coming week, with the release of the January Monetary Policy Report providing insight into how policymakers see low oil prices affecting the Canadian economy.
For further information, please contact:
John Maveety Manager, Residential Mortgages – Greater Ottawa Area TD Canada Trust
T: (613) 371-1984 F: (888) 899-1984 P: (866) 767-5442