Weekly Market Pulse - Week ending September 17, 2021

Market developments


Market indices generally posted negative returns for the week. Consumer sentiment in the U.S. remained near its nine-year low and the underlying data showed that purchasing intentions for big-ticket items further declined on complaints of higher prices. Internationally, slowing Chinese activity also weighed on markets, combined with worries of the potential default of real estate giant Evergrande Group.

Fixed income:

Yields rose as markets turn their eyes toward central banks. The U.S. Federal Reserve, Bank of England, and Bank of Japan are among the central banks meeting the week of Sept. 20. Investors are conflicted as to whether the weaker job readings, combined with the expectation of slowing inflation, could be enough to see central banks further delay tapering.


Oil prices gained for the week as OPEC forecasted stronger demand on rising global fuel consumption and output disruptions. U.S. crude oil stockpiles posted a large drawdown following Hurricane Ida in late August. Copper prices fell on worries on slowing growth on weak Chinese activity data.

Performance (price return)

Performance - Price return

As of September 17, 2021

Macro developments

Canada – CPI rises

Canadian inflation, as measured by the consumer price index, rose 0.2% in August, decelerating from a 0.6% increase in July. Transportation led the increase, gaining 1.1% in August on higher motor vehicle prices. Increasing prices of air

transportation and traveller accommodation were also major contributors. Nonetheless ongoing price pressures and lower 2020 base effects saw the year-over-year reading pick up and rise to an 18-year high of 4.1%, from 3.7% in July.

U.S. – CPI rises; Empire Manufacturing rises; University of Michigan Sentiment unchanged

U.S. CPI rose 0.3%, seasonally adjusted, in August, following a 0.5% increase in July. Gasoline, household furnishings, food, and shelter were the main contributors. On a year-over-year basis, inflation slightly slowed to 5.3% from 5.4%. The Producer Prices Index on the other hand accelerated to a new high of 8.3% year over year.

Manufacturing activity grew solidly in September. The Empire State Manufacturing General Business Conditions Index rose to 34.3 in the month, from 18.3 in August. New orders, shipments, and unfilled orders all picked up. Delivery times also continued to significantly lengthen, indicating continued supply chain pressures. Employment indicators pointed toward strong job growth, though the price pressures continued to intensify. Firms remained optimistic, planning substantial higher amounts of capital expenditure and technology spending.

Consumer sentiment was relatively unchanged in September remaining near a decade low. The University of Michigan Consumer Sentiment index rose to 71.0 for the month, from 70.3 in August. Purchasing intentions for big-ticket items declined due to higher prices. Economic expectations improved but remain subdued. Inflation expectations for the year ahead remained unchanged at 4.7%.

International – Chinese activity slows; U.K. CPI jumps

China’s retail sales slowed to 2.5% year-over-year for August, compared to 8.5% in July. Services consumption took a hit as the government had introduced tougher restrictions in late July to combat the spreading Delta variant outbreak. Sales of goods proved more resilient.

Chinese industrial production also slowed to 5.3% year over year for August, from 6.4% in July. Slowing manufacturing of 5.5% year over year, from 6.2%, was the main drag. By industry, demand for pharmaceuticals, metal products, machinery, telecommunications, and computers remain strong. On the other hand, textiles and auto manufacturing saw declines.

U.K. CPI rose 0.7% in August. Prices of goods surged 1.0%, led by household goods and furniture and food. Services increased 0.4%, on higher transportation and travel costs. On a year-over-year basis, the reading significantly accelerated to 3.2%, from just 2.0% in July. Base effects contributed to this large yearly increase, thanks to the discounted restaurant prices from the “Eat Out to Help Out” government incentive program and reductions in value added tax in August 2020.

Quick look ahead

Canada – Retail sales (September 23)

Canadian retail sales data for July will be released. StatsCan had previously estimated that sales had declined 1.7% as case counts rose. A preliminary estimate for August will also be released, which is also expected to show muted growth as cases continued to rise throughout the month.

U.S. – Fed meeting (September 22); Markit PMI (September 23)

The major event during the week of Sept. 20 is the Fed’s meeting. Expectations of the timing of any tapering announcements have been pushed back to sometime in Q4 this year following Jackson Hole, where the Fed consensus seemed to favour waiting for stronger job numbers before making any moves. In addition, the latest CPI reading reported slowing year-over-year numbers, while the nonfarm payroll number also was weaker than expectations. Although a formal tapering announcement is unlikely, the Fed may provide a preview of how tapering may occur and will also release an updated economic forecast.

Furthermore, the preliminary September Markit Purchasing Managers’ Index will provide an update on how firms are faring this month, with attention paid to supply-side issues and continued inability to meet demand.

International – Bank of Japan meeting and OECD Economic Outlook (September 21); Bank of England meeting, Japan PMI, and eurozone PMI (September 23); German ifo survey (September 24)

Internationally, we have a heavy week of surveys and central bank meetings.

Expectations are limited for the Bank of Japan. Policy is forecast to be unchanged, though the central bank may touch on recent subdued inflation readings and may revise its view on economic conditions due to increased coronavirus cases.

The Bank of England is expected to hold off on any tapering comments, despite the inflation surprise that accelerated to over 3% year over year in August. Similar to the Fed, the central bank will likely focus on the uncertainty surrounding economic growth and the labour market.

The Organisation for Economic Co-operation and Development (OECD) will release its interim economic outlook, in which it will report its latest projections for output, employment, government spending, and prices, among other indicators for member countries.

In Japan, case counts have been declining since late August. However, Japan’s flash PMI could see further weakness as COVID-19 restrictions were extended until the end of September for many regions, based on a need to shore up the stillstretched medical system.

The eurozone’s flash PMI is expected show slight easing but remain near the strong August readings. Activity is expected to have expanded solidly in September, though the spread of the Delta variant could have affected both local and global prospects.

The Germany ifo survey is forecast to reflect a modest slowdown for September. Rising infections and supply bottlenecks were commonly reported in the previous iteration and are likely to be a recurring theme this month.

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