October 2016

Global equity markets posted some mixed results in September. The US equity market gyrated in a volatile month and posted a marginal decline. While the Fed initially assuaged investor worries by leaving interest rates unchanged, several central bank officials have been voicing their support for a rate hike in the near-term, while German banking woes also spilled-over into the US market. In contrast, the resource-levered TSX advanced alongside the late-month surge in oil prices and stronger-than-expected growth results for the Canadian economy. Finally, both international and emerging market bourses ascended, as ongoing central bank pledges to maintain stimulative measures rekindled demand for risker assets abroad.

In what was a volatile month in fixed income markets, long-term bond yields initially pushed higher in response to speculation that global central banks were reaching their limits and were reassessing the benefits of further monetary easing, particularly as the Fed prepared for another rate hike and the ECB signalled no expansion to its asset purchase program. However, by late-September, the tides turned and long-term bond yields collapsed on the back of the Fed’s decision to remain on hold and as markets readjusted their view to a more gradual path to policy normalization in the US.

In commodity markets, OPEC members surprised the market with an accord to cut production for the first time in eight years in order to stabilize the oil market, which sent crude prices soaring at month-end. Meanwhile, gold prices were modestly higher in the environment of lower-for-longer interest rates, while copper prices surged higher in response to the firming economic backdrop in China, the largest consumer of the red metal.

Finally, the greenback was softer versus most of its peers during the month after the Fed scaled back its forecast for interest rates in the US, with a more gradual future trajectory placing a lid on US dollar gains, while the euro advanced as euro area inflation accelerated to the fastest pace since 2014.

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