By Mike Keerma
The major North American stock indices retreated through the week, as
tensions escalated between North Korea and the U.S. The CBOE Volatility
Index (VIX), often referred to as the “fear gauge,” climbed to 15.51, its
highest level since last November. Soft U.S. inflation in July combined
with geopolitical fears to produce a -1.4% loss for the
S&P 500 Composite Index on the week, while the
Nasdaq Composite Index fell -1.5%. Toronto’s benchmark
S&P/TSX Composite Index fell 2% as energy stocks retreated on a -1.5% decline in the price of
crude oil on the week. Living up to its safe-haven status,
gold gained 2.4% on the week, boosting the gold mining sector. The
Canadian dollar also lost ground, closing the week at US$0.7807 as investors sought shelter
in traditional strong currencies like the U.S. dollar, Swiss franc, and
The U.S. consumer price index rose a seasonally adjusted 0.1% month over
month in July, as did the less volatile core measure, which excludes food
and energy prices. U.S. CPI rose at a 1.7% annual rate, while the core
rate, which is one measure closely watched by the Federal Reserve, held
steady at an annual 1.7%. Despite second-quarter U.S. gross domestic
product growing at respectable annual 2.1% rate, the Fed is unlikely to
pull the trigger on another rate hike anytime soon. With inflation still
below the Fed’s target 2.0%, real wages climbing at an annual 0.7%, and the
unemployment rate down to 4.3%, most observers believe the Fed has no
reason to raise rates again until December at the earliest.
In company news, two of Canada’s largest insurance companies reported
strong earnings in the second quarter, boosted by growth of their business
in Asian markets.
Manulife Financial Corp. (TSX: MFC) posted core profits of $1.17 billion ($0.57 per share) for the quarter,
compared with $833 million ($0.40 per share) in the same quarter a year
Sun Life Financial Inc. (TSX: SLF) reported net income of $574 million ($0.93 per share), compared with $480
million ($0.78 per share) in the year-ago quarter.
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