U.S. Highlights
Consumer Price Index (CPI) inflation in the U.S. came in lower than expected in October, leading to a rally in equities and a decrease in longer-term Treasury yields. Congress passed a short-term funding bill to avert a government shutdown this week, maintaining current spending levels through mid-January. Retail sales data showed a slowdown in spending activity in October, with higher frequency credit card spend data indicating that the weakness has extended into November.
Canadian Highlights
Next week’s Canadian inflation report is expected to show easing price growth, similar to the U.S. CPI print. The fall federal update is also scheduled for next week, with a focus on housing supply. Housing starts remained elevated in October, but more action is needed to address affordability challenges. Canadian home sales and prices decreased in October, with Ontario’s housing markets experiencing the loosest conditions since the Financial Crisis.
U.S. – Extended Fed Pause Looking Increasingly Likely
The market sentiment this week leaned towards risk-on, fueled by a softer reading on October inflation and signs of slowing consumer spending, leading to expectations of a longer Fed pause. The S&P 500 ended the week 2% higher, while longer-term yields traded lower. The Consumer Price Index (CPI) report showed that both headline and core inflation were below market expectations, contributing to a slowing in consumer spending activity. Jobless claims have also turned higher, indicating a cooling labor market.
Canada – Supply, Supply, Supply
Canadian bond yields decreased this week, largely influenced by developments in the U.S. A softer-than-expected U.S. CPI report provided some hope that the Federal Reserve wouldn’t raise policy rates in the near-term. Next week’s release of the Canadian inflation report for October is expected to show cooling price growth. The fall federal fiscal update is also set to focus on housing supply amidst Canada’s affordability crisis. Housing starts remained at a highly elevated level in October, while home sales and prices in Ontario decreased, signaling potential further declines in home prices.
