Market week: Dovish Fed boosts stock markets

Surging oil, gold prices fail to move TSX

The main North American stock indices posted strong gains on the week, as the U.S. Federal Reserve Board (Fed) held its benchmark policy rate steady at 2.25%-2.50%, while signalling a more dovish bias. Fed Chairman Jerome Powell said at a press conference that “the case for a more accommodative monetary policy has strengthened.” This fuelled speculation that the Fed may be poised to cut rates later this year in the face of softening economic conditions in the U.S. and led to this week’s gains in the stock indices.

The blue-chip S&P 500 Composite Index rose 2.2% on the week, and touched a record high on Thursday as investor sentiment was buoyed by the Fed’s announcement. Likewise, the technology-weighted Nasdaq Composite Index advanced 3.0% on the week.

Toronto’s S&P/TSX Composite Index posted a weekly gain of 1.4%, despite a nearly 10% advance in the price of crude oil (mostly a result of tensions in the Middle East) and a related 4% gain in the price of gold, both of which have significant influence in the index’s resource sectors. However, Canada’s May inflation report showed the headline consumer price index climbing at a 2.4% annual rate in May, compared with 2.0% in April. That gave both bond yields and the Canadian dollar a boost, and lent further support to the Bank of Canada’s bias towards standing pat on rates, even if the Fed becomes more dovish.

Monitor the main stock and commodity indices daily with the Fund Library’s interactive Markets Page.

FUND NEWS

* First Asset launches high interest ETF. First Asset Investment Management on June 18 debuted its CI First Asset High Interest Savings ETF (TSX: CSAV), which aims to maximize monthly income for unitholders while preserving capital and liquidity by investing primarily in high interest deposit accounts. Rohit Mehta, President of CI First Asset ETFs, said in a release, “The CI First Asset High Interest Savings ETF has been designed to be a higher-yielding alternative to holding cash directly, while preserving the benefits of daily liquidity, convenience and flexibility.”

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