IAIC Market Update - March 7, 2022

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

What happened last week?

• On Wednesday morning, the Bank of Canada (BoC) raised interest rates by ¼%. The overnight rate is now ½%, the Bank Rate is ¾% and the deposit rate is ½%. Rates had not increased since 2018. The BoC stated, “The unprovoked invasion of Ukraine by Russia is a major new source of uncertainty. Prices for oil and other commodities have risen sharply. This will add to inflation around the world. . .” (Source)
• The U.S. Federal Reserve will make a monetary policy announcement on March 16th. The BoC’s move, based on inflation, employment, and international political events, could be foreshadowing to a potential increase by the Fed.
• On Friday, the Bureau of Labour Statistics released the latest non-farm payroll data. In February employment rose by 678,000 and unemployment fell slightly to 3.8%. As of the end of last month 6.3 million people remained unemployed compared with 5.7 million unemployed persons and an unemployment rate of 3.5% two years prior in February 2020. One of the major contributing factors to the shortfall in current employment is the Labor Force Participation Rate. In the U.S about 2 million less people are seeking jobs today than two years ago. In Canada, more people are employed today than 2 years ago. (Source)
• The invasion continues across Ukraine and will continue for the foreseeable future. The economic effects have already been felt. Commodity prices have surged dramatically adding more inflationary pressure to existing price increases caused by supply chain disruptions and emergence from the Covid-19 pandemic. “Price shocks will have an impact worldwide . . .” (Source)
  

What’s ahead for this week?

• In Canada, merchandise trade balance, goods and services trade deficit will be announced. The February employment report will be released on Friday.
• In the U.S., wholesale and retail inventories and budget balance for February will be released. The latest consumer inflation numbers will be released on Thursday in a precursor to the Federal Reserve’s announcement one week later.
• Globally, in addition to news from Ukraine or Russia, it will be a robust week for international economic releases. They will include Germany’s factory orders, retail sales, industrial production. China’s foreign reserves, trade surplus, and Consumer Price and Producer Price indexes; Eurozone’s GDP. Additionally, the European Central Bank will conduct and monetary policy meeting.