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The Canadian market enjoyed another strong monthly return, with the DEX Universe index gaining 1.81% in September. Ongoing uncertainty emanating from the European debt crisis and concerns about slowing global economic growth prompted investors to shift from risky asset classes, such as equities, to more secure ones, such as bonds. As well, the U.S. Federal Reserve announced another monetary stimulus programme, nicknamed Operation Twist, that triggered a substantial rally in longer term U.S. Treasury bonds and caused longer term Canadian bond prices to also rise.
Canadian economic data was mixed. Unemployment ticked up to 7.3% from 7.2% as job creation was weak. Inflation reversed the previous month’s decline, rising to 3.1% from 2.7%. On the positive side, Canadian GDP grew 0.3% in July, following a small decline in economic activity during the second quarter that was thought due to temporary factors. At its rate setting meeting, the Bank of Canada left its overnight target interest rate unchanged at 1.00%. In light of the deteriorating global economic outlook, the Bank felt there was less need to withdraw monetary stimulus (i.e. raise interest rates).
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