TORONTO 鈥� Weakness in energy and base metals led Canada's main stock index to a loss Tuesday, the day before a much-anticipated interest rate decision from the Bank of Canada, while U.S. markets rose.
The S&P/TSX composite index was down 138.51 points at 21,978.18.
In New York, the Dow Jones industrial average was up 140.26 points at 38,711.29. The S&P 500 index was up 7.94 points at 5,291.34, while the Nasdaq composite was up 28.38 points at 16,857.05.
U.S. markets are grappling with economic headlines 鈥渢hat have turned increasingly negative recently,鈥� said Kevin Burkett, portfolio manager at Victoria-based Burkett Asset Management.
鈥淲e鈥檙e in this bad news is good news type market,鈥� he added, as investors look for signs that the U.S. Federal Reserve could begin cutting interest rates soon.
The latest data point showed U.S. employers were advertising fewer job openings at the end of April than economists expected.
Investors likely see the report as another sign of the weakness they鈥檙e looking for in the economy, said Burkett.
However, markets are also concerned that the economy could weaken too much as the lag effect of rate hikes works its way through, he added.
鈥淲e want economic data to cool, and we want inflation to come to target because that鈥檚 what will cause rate cuts. But we worry there may be overshoot,鈥� he said. 鈥淚n particular, we worry that because the lag on the rate hikes was longer than I think most expected.鈥�
Friday will bring a bigger report on the U.S. labour market, the May jobs report.
The labour market is where strength has been the most resilient, said Burkett, surprising market watchers.
North of the border, the Bank of Canada is widely expected to begin cutting its key interest rate on Wednesday, said Burkett, though it鈥檚 not a given.
If the central bank doesn鈥檛 cut this week, a cut in July is all but guaranteed, he said.
However, the fact that the U.S. isn鈥檛 likely to see cuts until at least the fall complicates the Bank of Canada鈥檚 decision, added Burkett, and a divergence between the two central banks鈥� policies could have negative currency implications for the loonie.
The downward trend in oil prices continued on Tuesday, weighing on the TSX, where the energy index was down more than two per cent.
鈥淭he same negative macro headlines that have raised likelihood of a cut tomorrow are affecting expected demand for energy products, which is weighing on oil prices,鈥� said Burkett.
The July crude oil contract was down 97 cents at US$73.25 per barrel and the July natural gas contract was down 17 cents at US$2.59 per 1,000 cubic feet.
The Canadian dollar traded for 73.09 cents US compared with 73.34 cents US on Monday.
The August gold contract was down US$21.90 at US$2,347.40 an ounce and the July copper contract was down 13 cents at US$4.54 a pound.
-- With files from The Associated Press
This report by The Canadian Press was first published June 4, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
