Market Update

Weekly commentary – For the week ended September 19, 2025

Global equity markets posted a small gain over the week ended September 19. The rate cut from the U.S. Federal Reserve Board (Fed) excited investors but this was partially offset by concerns over the global economy. In Canada, the S&P/TSX Composite Index moved higher and reached a new record high, led by the Information Technology sector. U.S. equities finished higher. Yields on 10-year government bonds in Canada and the U.S. increased. Oil and gold prices rose over the week.

The Bank of Canada returns to cutting rates

• The Bank of Canada (BoC) lowered its benchmark overnight interest rate by 25 basis points (bps) to 2.50% at its September meeting, in a move widely expected by economists.

• The BoC noted that inflation appears to be contained, but there are signs the labour market is slowing and economic activity is moderating.

• This was the BoC’s first rate cut after holding for three straight meetings, as it was closely monitoring how tariffs would impact Canada’s economy.

• U.S. tariffs have had a negative impact on Canada’s economy. This is particularly notable in the labour market, where the country has lost jobs in recent months and the unemployment rate has risen.

• Canada’s central bank offered little in terms of future guidance on rate cuts. However, markets expect the BoC to cut interest rates again.

U.S. central bank pleases markets with rate cut

• The Fed ended its September meeting by lowering the target range of its federal funds rate by 25 bps to 4.00%-4.25%.

• This marked the Fed’s first rate cut of 2025 as the central bank had previously elected to hold steady amid elevated inflationary pressures and uncertainty about how trade tensions would impact the U.S. economy.

• The Fed acknowledged inflation remains high. However, Fed officials believed a rate cut was warranted in response to significant deterioration in the labour market and slowing economic activity.

• In its new projections, the Fed expects the U.S. economy to grow by 1.6% this year, compared to 1.4% in its earlier projection. The U.S. central bank projects inflation to remain elevated this year and next.

• The Fed expects two more rate cuts this year and one next year. This is a possibility given the fragile nature of the economy amid trade tensions and a softening labour market.

Soft domestic demand persists in China

• Retail sales in China grew by 3.4% year-over-year in August compared to 3.7% in the previous month, which was below economists’ expectations.

• Lacklustre retail sales growth showed China’s economy is struggling amid soft domestic demand.

• The growth in sales of food and household appliances slowed in August over July. Sales for petroleum and related products dropped.

• Industrial production rose by 5.2% year-over-year, down from the 5.7% increase in July. This marked the slowest pace of growth in industrial production since August 2024, due in part to U.S. tariffs and weak domestic demand.

• Data pointed to slower growth for China’s economy in the third quarter. This could raise calls for the government and central bank to add more stimulus measures to boost economic activity.

Intel gets big investment from NVIDIA

• NVIDIA Corp. will invest US$5 billion into Intel Corp. The two companies will collaborate to develop chips for personal computers and data centers.

• Chipmaker Intel has struggled in recent years as AI became more central to the semiconductor industry. The U.S. federal government recently invested in Intel, purchasing about 10% of the company.

• Earlier in the week, a Financial Times report said China’s government instructed companies to stop purchasing NVIDIA’s RTX Pro 6000D chip. This came after Chinese regulators said NVIDIA is violating China’s anti-trust laws.

• China’s move to block NVIDIA’s chips could be a sign of confidence in its domestic chipmakers and an attempt to gain leverage in trade negotiations.

• Semiconductors and developments in AI have been a key sticking point in U.S.-China relations. The U.S. administration agreed to a deal to get a portion of NVIDIA’s sales of certain chips in China. In early August, Trump said he planned on putting a 100% tariff on semiconductors imported into the U.S.