Market performance – as at June 27, 2025
Global equity markets advanced over the week ended June 27. Data from the U.S. eased fears about the impact of tariffs on the economy. Tensions in the Middle East subsided, raising investors' appetite for risk assets. In Canada, the S&P/TSX Composite Index advanced and reached a new record high, led by the Information Technology sector. However, Canadian equities pulled back late on Friday after U.S. President Donald Trump said he was ending trade talks with Canada in response to Canada implementing the digital services tax. U.S. equities also advanced. The yield on the 10-year Government of Canada bond was largely unchanged, while 10-year U.S. Treasury bond yields declined. Oil prices fell sharply over the week as tensions in the Middle East subsided, alleviating concern about the supply of oil. The price of gold also declined.
Canada’s inflation rate holds steady
Canada’s annual inflation rate was 1.7% in May, matching the rate in April, which was the lowest since September 2022.
Gasoline prices continued to decline, but this time at a slower pace compared to April. Shelter and food price growth moderated. Within the shelter category, mortgage costs have come down, with the Bank of Canada (“BoC”) lowering interest rates over the past year.
Two key measures of core inflation tracked by the BoC slowed in May. The median and trim measures both fell to 3.0%.
Canada’s economy was feeling the pressure in April from trade tensions with its largest trade partner. Canada’s gross domestic product contracted by 0.1% over the month.
The BoC noted it is closely monitoring inflation, which could pick up in response to trade tensions with the U.S. Markets are still expecting the BoC to cut rates again in 2025.
U.S. personal consumption expenditure price index accelerates |
The personal consumption expenditure price index (“PCE”) rose to 2.3% in May from 2.2% in April, matching expectations.
Energy prices declined, which partially offset an increase in the growth of food prices.
Core PCE also increased in May, increasing to 2.7%.
The data also showed that consumers may be feeling the pinch from shifting trade policy. Personal spending fell by 0.1% in May, its first decline since January. Personal income also declined, dropping by 0.4%, largely in response to a decline in government transfers.
Contained inflation and signs of a weaker consumer could be making the case for the U.S. Federal Reserve Board (“Fed”) to lower interest rates again. The Fed has been on the sidelines this year, preferring to wait and see the impact of tariffs on the economy.
China looks to shift to consumer-driven economy |
China’s Premier, Li Qiang, said he is confident China’s government can shift its economy to be driven by domestic consumption.
As global trade policy evolves, the government is looking to build a strong consumer-driven economy on top of its strong manufacturing capabilities.
He thinks this would help China become a stable foundation for global trade activity.
Manufacturing capabilities will still be an important part of China’s economy. However, profit growth has been relatively muted in recent years. For the period between January and May 2025, industrial profits in China fell by 1.1% over the same period last year.
In this rapidly changing global economic environment, China is searching for other opportunities to drive growth over the years to come. Policymakers have taken many steps in recent months to help boost domestic consumption.
Europe’s business activity stabilizes |
Business activity in Europe was stable in June, expanding at the same pace as it did in May.
Activity in Europe’s services sector returned to expansion after shrinking in May. Meanwhile, the manufacturing sector contracted again.
Despite expansionary conditions, the data was relatively soft, which likely puts a cap on Europe’s overall growth in the second quarter. Europe’s economy has been aided by looser financial conditions, but trade tensions with the U.S. have hurt consumer and business confidence, stunting overall business activity.
European consumer confidence edged lower in June. Consumers are still concerned about their own personal financial situations amid an uncertain domestic and global economic outlook.
The European Union is one of several nations that have seen trade talks with the U.S. stall, mainly in response to the U.S. investigation into critical sectors for national security. This could add additional tariffs to certain products, such as chips and steel, after a deal was already reached.
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