Below is a summary of some of the relevant news items from the Capital Markets and the Economy from the past week extracted from RBC Global Insights and FactSet Research. 

Markets

Market scorecard as of close on Friday May 28, 2021.

Equity Indices	Level	1 week	YTD	52-week
S&P/TSX Composite	19,852	1.7%	13.9%	30.1%
S&P 500	4,204	1.2%	11.9%	38.8%
NASDAQ	13,749	2.1%	6.7%	46.7%
Euro Stoxx 50	4,071	1.1%	14.6%	31.5%
Hang Seng	29,124	2.3%	7.0%	25.9%

Source: Bloomberg, RBC Wealth Management

• It’s a relatively quiet morning as the U.S. and the U.K. remain closed for holidays on Monday.

• TSX closed higher in Friday afternoon trading near record high. Most sectors higher led by health care with utilities the laggard.

• Major U.S. indices all posted weekly gains as S&P 500 broke two-straight weekly declines and Nasdaq posted second-straight weekly gain after four-straight weeks of declines.

• Asian stocks recovered from a slump in early May, with the MSCI Asia Pacific Index climbing above its 50-day moving average on May 26. Recent comments from Federal Reserve officials that the current jump in consumer prices is temporary, partly eased concerns about rising inflation, while a softening U.S. dollar also benefit Asian equities.

Economy

• OECD forecasts global output will recover by 2022. According to the Financial Times, the OECD said that the global economy will reach pre-pandemic levels by the end of next year, an improvement from its November 2019 forecast. It estimates global GDP will grow 5.8% this year, up from a projection of 4.2% made in December.

Canada

• Housing prices and household indebtedness were the main areas of focus in the Bank of Canada’s annual Financial System Review. With more Canadians working from home during the pandemic, demand for suburban homes quickly outpaced supply, causing prices to rise nationwide.

• Canadian retail sales printed a month-over-month gain of 3.6% in March, coming in ahead of economists’ expectations and contributing to a third consecutive quarterly increase. However, following strong retail sales growth figures in February and March, preliminary estimates from Statistics Canada revealed that retail sales fell 5.1% in April as a result of renewed pandemic lockdowns in some provinces

• Canada’s supply chain is facing bottlenecks as the economy starts to recover, leading to tighter margins and upward pressure on prices. According to the Globe and Mail, Canadian wholesalers and retailers are dealing with months-long delays from their suppliers in Asia, and manufacturers are having difficulty sourcing raw materials. As a result, higher transportation, storage and commodity prices are being passed to the consumer, adding to concerns about rising inflation. The Bank of Canada’s commodity price index, which includes 26 commodities, has reached a seven year high.

U.S.

• The 10-year Treasury bond yield continued to decline last week, reaching 1.6%, its lowest closing level in over a month. Bond prices were pushed higher, in part, by economic data disappointments, including elevated continuing jobless claims and indications that the sharp rally in home prices has begun to curtail activity, as expectations may have begun to outrun reality in several key areas.

• A trio of Fed speakers also helped fixed income markets by reiterating that policy makers continue to view recent inflation—most notably April’s 4.2% year-over-year increase in the Consumer Price Index—as driven by largely transitory factors.  

• Negotiations continue between Senate Republicans and the Biden administration on infrastructure legislation. Press reports indicate broad agreement between the parties on the need for additional investment, but significant differences remain on both the size of the plan—the two sides’ most recent proposals differ by almost $700 billion—and how to pay for it, with Republicans opposing any tax funding component.

Further Afield

• The UK launched its Emissions Trading Scheme (ETS) last week. An ETS is a market-based approach to reducing carbon emissions, with companies that produce emissions of CO2 and other greenhouse gases above a set level having to buy allowances through the ETS to offset their excess emissions.

• Chinese officials are attempting to cool commodity prices and reduce speculative trading activity in commodity markets. According to Reuters, China’s banking regulator has asked Chinese banks to stop selling investment products linked to commodity futures to individual investors.

• China’s top decision-making body said the government would ease the limit on births to allow three children per family, in an effort to manage the country’s aging population (Wall Street Journal).

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Shiuman