TSX higher with Bank of Canada, Fed decisions this week in focus

Investing.com - Canada’s main stock exchange was higher on Monday, as investors looked ahead to key central bank interest rate decisions this week.

The S&P/TSX composite index gained 147 points or 0.50% at 29,431.02. 

Index inched lower by 0.4% on Friday, ending at 29,283.82, in a breather for the average amid a torrid period of frequent new record highs.

All eyes are on the upcoming Bank of Canada rate decision on Wednesday, with policymakers seen slashing rates by a quarter-point in a bid to offer support to an economy that is heavily exposed to U.S. President Donald Trump’s sweeping tariffs. The Canadian job market slowed for a second straight month in August and the wider economy contracted sharply in the second quarter, although inflation has not strayed far from analysts’ expectations.

U.S. stocks steady

U.S. stocks held largely steady, as investors cautiously awaited a potential Federal Reserve rate cut as well later in the week.

The Dow Jones Industrial Average gained 49 points, or 0.11%, the S&P 500 index rose 33 points, or 0.51%, and the NASDAQ Composite climbed 207 points, or 0.94%.

The three main Wall Street indices all reached record highs last week, driven by growing market confidence in an impending Fed rate cut.

The S&P 500 gained 1.6% last week, the Dow Jones Industrial Average rose 1% and the tech-heavy NASDAQ Composite jumped 2%.

Expected Fed cut in spotlight

The Fed will be in the limelight over the coming days, as markets are now all but certain that the central bank will cut interest rates at the end of its latest two-day gathering on Wednesday.

Underpinned by signs of a softening U.S. labor market, policymakers are widely anticipated to back the first rate cut since an easing cycle was paused in December. Bringing down rates can, in theory, help spur investment and hiring.

However, a reduction can risk pushing up inflationary pressures at the same time. Last week, a monthly U.S. consumer price index reading accelerated slightly due to an uptick in housing and food costs, a potential indication of sticky inflation.

Yet a separate gauge displaying a rise in weekly initial jobless claims likely kept a Fed rate cut on track.

There is now a roughly 95% probability that borrowing costs are lowered by 25 basis points, as well as about a 5% chance of a deeper half-point drawdown, according to CME’s FedWatch Tool. The Fed’s target rate currently stands at a range of 4.25% to 4.5%.

Investors also await the Fed’s updated projections and Chair Jerome Powell’s remarks for clues on the path of monetary policy through the end of the year.

Crude extends gains

Oil prices rose, extending recent gains on the back of potential disruptions in Russian supply following Ukrainian drone attacks on Moscow’s energy infrastructure.

At 12.05 ET, Brent futures were higher by 0.45% at $67.29 a barrel, and U.S. West Texas Intermediate crude futures rose 0.2% to $62.79 a barrel.

Both contracts gained more than 1% last week as Ukraine stepped up attacks on Russian oil infrastructure, including the largest oil exporting terminal Primorsk and the Kirishinefteorgsintez refinery, one of the two largest refineries in Russia.

The strikes have the potential to take large amounts of Russian oil production offline, and could herald potential supply disruptions, especially for Moscow’s top markets India and China.

Gold gains 

Gold prices gained following a record high last week, underpinned by projections for a Fed rate cut.

Spot gold gained 1.04% to $3,681.58 per ounce by 12.05 ET, not far from an all-time high of $3,673.95 touched last week. U.S. gold futures ticked 0.3% lower to $3,676.90/oz at 6.54 am ET

The yellow metal has surged nearly 40% so far this year amid increased safe-haven demand due partially to Trump’s trade policies.