Morning Market Brief: Monday, May 1, 2023

The spotlight shines on the Fed?

Early in the week, investors will place their bets on the US Federal Reserve Board’s (Fed) interest-rate decision on Wednesday. Fed meetings are highly anticipated as they set the monetary policy path of the US economy, affecting other countries worldwide. In Canada, manufacturing and labour market data will be released this week.?

• Canada’s manufacturing activity for April will be released today. Canada’s manufacturing sector contracted in March due to a fall in new orders and output.
• The Fed comes into the spotlight on Wednesday afternoon. Markets expect another 25-basis-point increase amid persistently high inflation. This would take the target range of its federal funds rate to 5.00%-5.25%.
• Labour market data on both sides of the border will be released on Friday. Labour markets in Canada and the US have been strong coming out of the pandemic, with rising wage growth contributing to elevated inflation.
• There will be several key announcements from other parts of the world. European inflation for April will be released on Tuesday, China’s manufacturing activity in April on Wednesday, and the European Central Bank’s rate decision on Thursday.
• Earnings announcements will continue this week. In Canada, notable earnings will come from TMX Group, Restaurant Brands International and Loblaw. In the US, several key company earnings details will be released, including Berkshire Hathaway, Pfizer and Uber Technologies.

Last week,?investor confidence in US banks was muted after First Republic Bank announced deposits sank 42% in the first quarter of 2023. In response, regulators and lawmakers worked on a potential solution. Over the weekend, regulators took possession of First Republic Bank. Then, JPMorgan Chase acquired all deposits of the bank, along with most of its other assets. This should help alleviate concern about the US banking sector. The potential for contagion in the Canadian banking industry seems relatively low, given the capital strength of our banks, and highly regulated environment. With considerable uncertainty in the global economy, monitoring economic developments to understand how they may affect financial markets and your portfolio is a good idea. If the Fed raises rates again and delivers another relatively hawkish tone, it could weigh on stock returns in both Canada and the US, and put upward pressure on government bond yields.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.