Morning Market Brief: July 15, 2024

Canadian inflation, retail sales and the ECB on the docket

There will be several critical economic announcements in Canada and from around the world this week that investors will closely monitor. The question stemming from each will largely be the same: how will these economic results impact central bank actions? Financial markets will also react to several key quarterly earnings announcements in the US this week.

• Statistics Canada (StatsCan) will announce Canada’s inflation rate for June on Tuesday. Annual inflation ticked higher to 2.9% in May. Still, it has dropped substantially over the past two years, which allowed the Bank of Canada (BoC) to start cutting rates in June. More progress towards the BoC’s 2% target will likely result in more rate cuts this year.
• Canada’s retail sales will be released on Friday. Retail sales increased in April, which marked their first increase in four months. However, StatsCan estimated that retail sales dropped in May. Tight financial conditions are weighing on Canadian households, hindering spending activity. The BoC is hoping that its rate cut will help reignite spending.
• The European Central Bank (ECB) will make its interest-rate announcement on Thursday. At its last meeting, the ECB reduced its policy interest rate from 4.50% to 4.25%. More rate cuts are likely coming, but early estimates show the ECB might hold steady at this meeting.
• South of the border, US retail sales will be released on Tuesday, industrial production on Wednesday and initial jobless claims on Thursday.
• US earnings announcements will be front and centre this week. Notable earnings include BlackRock, Bank of America, Goldman Sachs, Johnson & Johnson, Netflix and American Express.

This week will bring no shortage of key announcements that will drive financial market performance. In Canada, the June inflation report, and to a lesser degree the retail sales report, will go a long way in helping form the next rate decision from the BoC.

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