Morning Market Brief: June 3, 2024

Central banks come into the spotlight?

Global investors’ attention will turn to Canada and Europe this week where their respective central banks are scheduled to make their next interest-rate announcements. Investors are currently expecting rate cuts from both banks. Financial market performance will be highly driven by the decisions of both banks, and how that might impact other central banks that are holding rate announcements later in the month. Here is what to watch for this week.?

• The Bank of Canada (BoC) makes its interest-rate announcement on Wednesday. According to a Bloomberg survey, economists are estimating a 25-basis-point rate cut from Canada’s central bank amid a slowdown in inflation and weaker economic growth.
• Canada’s labour market data for May will be released on Friday. Canada’s economy added jobs in April, but not enough to keep up with population growth, keeping Canada’s unemployment at its highest level in two years.
• The European Central Bank (ECB) comes into the spotlight on Thursday. Earlier this year, ECB officials commented that rate cuts could come as early as June. The time has arrived, and all signs point to a potential rate cut from 4.50% to 4.25%.
• Elsewhere, US manufacturing activity will be released today, China’s business activity on Tuesday, European services on Wednesday, European retail sales on Thursday, US trade also on Thursday and US labour market data on Friday.
• There are several key earnings announcements to watch for this week. Notable earnings in Canada include Lululemon, Transcontinental and Saputo. In the US, key earnings come from HP, Dollar Tree and GameStop.

Two major central bank announcements are sure to make it an exciting week for equity and fixed income markets. The BoC is expected to begin lowering interest rates this week, which might help ease pressure on Canadian households and reignite stronger spending. It could also fuel demand for real estate with mortgage rates likely to drop.

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