Bourstad stock market simulations - Summary of the markets for the week ended on August 2, 2024

Bonds up sharply, equities and crypto down sharply

Once again this week, bonds were the only asset class in our tracking universe to rise. In Canada, the week saw slightly higher-than-expected growth in gross domestic product in May, with real annual growth of 1.1% for the past 1 year; however, gross domestic product per capita is down for the eighth consecutive quarter. In the United States, as expected, the Federal Reserve left its policy rate unchanged in the 5.25% to 5.5% range at its July monetary policy meeting. Job creation in July disappointed the financial markets, with only 114,000 jobs created, and compared with the 174,000 forecast by economists. Elsewhere in the world, the Bank of Japan raised its key policy rate from 0.1% to 0.25% to halt the yen's slide against the US dollar in recent months. Over the coming week, we'll be watching: in Canada, June international trade (Tuesday), the Ivey Purchasing Managers' Index for July (Wednesday) and employment data (Friday); in the U.S., June international trade (Tuesday), June consumer credit (Wednesday) and June wholesale sales (Thursday)..

Five of the six stock markets we follow ended the week down sharply. The Shanghai Stock Exchange was the only stock exchange in our tracking universe to finish higher, with a gain of 0.5%. The New York and Toronto stock exchanges fell by -2.1% and -2.6% respectively. With a decline of -3.1%, the NASDAQ 100 is in downward correction; since peaking on July 10, this index has fallen by -10.8%. The Paris Bourse is down -3.5%. The biggest decline, however, was recorded on the Tokyo Stock Exchange, which tumbled by -4.7%; the increase in the Japanese central bank's key rate had an immediate effect on the yen exchange rate, putting Japanese exporters at a disadvantage.

Yields on 10-year government bonds are down sharply for the four top-rated countries we track. Lower yields mean higher bond prices, given the inverse relationship between yields and bond prices. U.S. bond yields, the market's main benchmark, fell by -41 bps (1 basis point or bps = 0.01%) to 3.79%. The Canadian bond yield fell by -31 bps, leaving the Canadian rate 78 bps below the US rate. Germany's bond yield is down -23 bps to 2.18%. Japan's bond yield fell by -10 bps to 0.96%.

On the commodities market, three of the four commodities we follow are down. Gold, a traditional safe-haven, was the only commodity in our tracking universe to rise, with a gain of 2.3%. The main declines were seen in the commodities with the most direct impact on inflation, oil and corn, which fell by -4.7% and -1.6% respectively. Copper limited its losses to -0.5%.

In the crypto-currency sector, the two cryptos we follow are down sharply: bitcoin by -8.0% and ethereum by -7.3%.

On August 2, it cost 0.4¢ CAD more to buy one US dollar than on July 26. In contrast, the euro and yen are rising against Uncle Sam's dollar: the single European currency by 0.5% and the Japanese currency by 4.9%. Since July 11, the yen has risen by 10.4% against the US dollar.

See the detailed table by following this link:

https://iclf.ca/DL/BTTT_sommaire_marches_240802.pdf

Paul Bourget
Project Director, Bourstad
CIRANO
paul.bourget@cirano.qc.ca

About CIRANO (www.cirano.qc.ca )

The Center for Interuniversity Research and Analysis of Organizations (CIRANO) is a multidisciplinary, liaison and transfer research center, whose mission is to accelerate the transfer of knowledge between the research community and users in industry and public services.

About BOURSTAD (www.bourstad.ca )

The Bourstad program is an activity of the Center for Interuniversity Research and Analysis of Organizations (CIRANO) which receives support from many partners for this financial education project: the Autorité des marchés financiers, its main partner, TD Bank, CFA Montreal , the Canadian Investment Regulatory Organization (CIRO), Les Affaires, Finance Montreal, TMX Group, Hyprasoft, Groupe Investissement responsable and QuoteMedia.