Canada’s main stock index crept lower on Monday even as the price of oil rose, while U.S. markets were led higher by the Nasdaq as investors anticipate an upcoming interest rate decision by the central bank.
The S&P/TSX composite index closed down 11.97 points at 21,837.18.
In New York, the Dow Jones industrial average was up 75.66 points at 38,790.43. The S&P 500 index was up 32.33 points at 5,149.42, while the Nasdaq composite was up 130.27 points at 16,103.45.
U.S. markets rose amid relative calm ahead of Wednesday’s interest rate announcement by the U.S. Federal Reserve, said Hadiza Djataou, vice-president and portfolio manager of global bonds at Mackenzie Investments
“I think this meeting is really instrumental in giving the direction for risk assets, equity included, and also fixed income,” she said.
Though the central bank is expected to keep the key interest rate steady, its updated projections could shake the market if its expectations for rate cuts move lower, said Djataou.
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Right now, market expectations are more or less in line with what the Fed previously projected, after coming down from “ludicrous” highs just a few months ago, she said.
“It is a turning point.”
Inflation has proven sticky in the U.S. so far this year, said Djataou, while it’s decelerated a little more in Canada. The last mile of both central banks’ inflation fight is proving tough, she said.
Tuesday will bring the latest Canadian inflation data. It’s expected to be higher because of energy prices but for core inflation to be unchanged, said Djataou.
But if the data is hotter than expected that could pose a risk, she said, noting that markets currently expect the same level of cuts this year in both countries.
The TSX was flat Monday despite strength south of the border, as the continued momentum of AI isn’t reflected in the relatively small part tech plays on the Canadian index.
Canadian markets are also pricing in the economic environment, with some concern for consumers and banks, said Djataou.
On the world stage, all eyes are on the Bank of Japan, which hasn’t hiked rates — in negative territory as of Monday — since 2007. A tightening of the central bank’s policy could have a global impact, said Djataou, as it could compel Japanese investors to invest more at home. Currently, they own a lot of foreign assets, she said.
The Canadian dollar traded for 73.85 cents US compared with 73.89 cents US on Friday.
The May crude oil contract was up US$1.58 at US$82.16 per barrel and the April natural gas contract was up five cents at US$1.70 per mmBTU.
The April gold contract was up US$2.80 at US$2,164.30 an ounce and the May copper contract was up half a penny at US$4.13 a pound.
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