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Daily Pulse

One of our most accessible tools, this daily comment keeps you abreast of developments on the North American and international financial markets.

Michel Doucet

Michel Doucet
Vice-President and
Portfolio Manager

April 17, 2024

Canada

Underlying inflation continued its gradual descent in March, leaving a near-term rate cut on the table for the Bank of Canada. Headline prices rose 0.6% during the month, slightly below the consensus forecast. That took the annual rate up one tick to 2.9% and saw inflation average 2.8% in Q1, in line with the central bank’s recent projection. Excluding food and energy, consumer prices increased 0.3% in seasonally-adjusted terms, which saw the year-over-year pace also rise a tick to 2.9%. Despite the slight increase in headline inflation, a host of other measures reinforced the message that underlying price growth is normalizing. Separately, the share of components in the CPI basket that are rising more than 3% is down to 38% from 41%. Moreover, the share of components showing price growth of less than 1% is up to 44% from 38% in February. Both suggest that the breadth of inflationary pressures is becoming more consistent with the Bank of Canada’s 2% target. The inflation data for March should give monetary policymakers confidence that the progress made in taming consumer price pressures is sustainable.

Canada will hike capital gains taxes on companies and wealthy individuals to two-thirds, from 50%, from June 25. Individual taxpayers with gains over C$250,000 in a year will be affected. The higher taxes will be used to help pay for new spending to make housing more affordable.

United States

The International Monetary Fund inched up its expectations for global economic growth this year, citing strength in the US and some emerging markets, while warning the outlook remains cautious amid persistent inflation and geopolitical risks. Global economic activity will expand 3.2% this year, it said Tuesday in its World Economic Outlook, up 0.1 percentage point from its January estimate. The forecast for 2025 was unchanged at 3.2%. Bloomberg Economics pegs this year’s global expansion at 2.9% and next year at 3.1%. Despite the upgrade, the IMF warned high borrowing costs and the withdrawal of fiscal support are weighing on short-term growth, while the medium-term outlook remains the weakest in decades due to low productivity and global trade tensions.

Tesla Inc. shares extended their decline for 2024, pushing the electric-vehicle maker’s market valuation below $500 billion, as a round of job cuts this week further soured sentiment around the company. The stock tumbled about 4% to below $154 at one point on Tuesday in New York, bringing this year’s drop to some 38%. Tesla shares are the second-biggest decliner on the S&P 500 Index in 2024, erasing more than $290 billion in value since year-end. The company hasn’t closed with a market value under $500 billion since late April of last year.

Europe

LVMH sales growth slowed at the start of the year as wealthy consumers reined in spending on costly Louis Vuitton handbags and Hennessy Cognac. Organic revenue at the luxury group’s fashion and leather goods unit — its biggest division — rose 2% in the first quarter. That compares with 18% growth a year earlier at the unit, which houses brands such as Louis Vuitton, Christian Dior, Celine and Loewe. The pace of growth was the slowest for a first quarter since 2016 — excluding 2020.

The European Central Bank is closing in on a reduction in interest rates as long as shocks don’t derail the slowdown in euro-zone inflation, according to President Christine Lagarde. Lagarde told CNBC on Tuesday that officials in Frankfurt are “observing a disinflationary process” that’s currently in line with expectations and should sustainably return consumer-price growth to 2% by mid-2025. “If we don’t have a major shock in developments, we are heading towards a moment where we have to moderate the restrictive monetary policy that we have,” she said. That is likely to happen in “reasonably short order,” Lagarde said, without elaborating. The remarks come just five days after the ECB bolstered expectations that interest rates will be cut in June as inflation recedes.

Asia

Joe Biden will propose tripling tariffs on some Chinese steel and aluminum products to 25% at a visit to Pittsburgh today to shore up America’s steel sector and woo its workers in this year’s election. The US is also starting a formal probe into China’s shipbuilding industry.

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