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Global equity markets finished largely unchanged over the week ended May 15. Investor sentiment was relatively muted after the U.S. and Iran were unable to reach an agreement to end the war between them. Furthermore, higher energy prices left investors to consider the possibility of higher interest rates. In Canada, the S&P/TSX Composite Index declined, dragged down by the information technology sector. U.S. equities inched higher. Yields on 10-year government bonds in Canada and the U.S. increased, largely in response to inflationary concerns. The price of oil continued to climb higher, while the price of gold declined.
Canada’s real estate market facing muted activity
Canadian home sales ticked up a modest 0.7% in April over March, a small but positive move after months of sluggish activity.
Home sales were still 4.0% below their level in April 2025, reflecting ongoing caution among buyers dealing with economic uncertainty and elevated mortgage rates. The average home price in April came in at $695,412, a gain of 2.2% compared to the same month last year, suggesting prices are beginning to stabilize.
New listings increased 4.1% month over month. With supply growing faster than demand, buyers have more options to choose from.
The Canada Mortgage and Housing Corporation reported that housing starts increased by 17% in April to 279,300 units. This marked the highest level of starts since December 2025.
A slow Canadian housing market signals broader economic softness. Canadian consumers are facing economic uncertainty and rising prices, which are hurting confidence and could impact demand for housing.
U.S. inflation rate picks up again in April
The U.S. inflation rate rose to 3.8% annually in April from 3.3% in March, marking its highest rate since May 2023.
Energy is the biggest driver, with gasoline up nearly 30% and fuel oil up over 50% year over year, largely in response to the ongoing conflict in the Middle East.
Groceries and housing costs also continued to rise, adding further pressure on household budgets.
For the first time in three years, wages are no longer keeping pace with inflation, meaning paychecks are effectively buying less than they were before.
The broader economic outlook is uncertain. The U.S. Federal Reserve Board faces a difficult choice between keeping interest rates high to fight inflation or cutting them to support economic growth, with no easy path forward as long as energy prices remain elevated.
U.K. economy grows at faster pace in Q1
A preliminary estimate showed the U.K. economy grew by 0.6% in the first quarter of 2026, an increase from the 0.2% growth recorded in the final quarter of 2025.
The services sector was the biggest driver of performance, expanding by 0.8% in the quarter. Production and construction also contributed positively to growth.
Despite the solid headline number, economists caution that the data largely captured activity before the conflict in the Middle East began to weigh on the economy.
Business confidence has slipped, input price inflation has risen and job vacancies are declining, pointing to potential weakness in the U.K. economy ahead.
The Bank of England kept its key interest rate at 3.75% at its last meeting, but it is expected to raise interest rates later this year as the energy shock stemming from the conflict in the Middle East pushes U.K. consumer prices higher.
Rising consumer and producer prices in China
China’s annual inflation rate rose to 1.2% in April, which was above most economists' expectations and the 1.0% rate recorded in March.
Producer prices in China jumped by 2.8% year over year in April, marking the fastest pace in over three years. The surge was fuelled largely in response to rising energy and commodity prices tied to the ongoing conflict in the Middle East.
Rising producer prices in China could add pressure to global supply chains, potentially making imported goods more expensive for global consumers at a time when inflationary pressures are rising.
U.S. President Donald Trump and a delegation of U.S. representatives visited China last week to meet with President Xi Jinping. Trade, the conflict in the Middle East and Taiwan were on the agenda.
The U.S. and China reinforced their commitments to creating a robust relationship between the two countries and improve trade ties. However, the two sides disagree about Taiwan with the Xi saying it could cause conflict between the world’s two largest economies. Trump and Xi did not make a final decision about Taiwan. Trump said he will decide on the U.S. arms deal with Taiwan soon.
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