TSX inched up with Bank of Canada rate trajectory in focus

Investing.com - Canada’s main stock exchange gained marginally on Tuesday with investors returned for a holiday-shortened week with the outlook for interest rates in focus.

By 4.05 EST, the S&P/TSX 60 index standard futures contract had inched up by 1.2 points, or 0.07%.

The Toronto Stock Exchange’s S&P/TSX Composite ended up 51 points, or 0.18% at 28,615.62. 

The index closed at a fresh record high on Friday, powered in part by bets that the Bank of Canada will ratchet down interest rates in the wake of softer-than-anticipated domestic growth data.

For the month, the average advanced by 4.8%, notching a fourth straight monthly climb.

Gross domestic product for the second quarter ended on June 30 contracted by 1.6%, reversing downwardly-revised growth of 2.0% in the prior three-month period, according to figures from Statistics Canada on Friday. It was the first quarterly contraction in seven quarters.

While money markets have raised their bets of a Bank of Canada rate cut at its September 17 meeting to a roughly 48% chance, analysts quoted by Reuters flagged that more data is due to come out before the gathering. That includes the publication of August employment numbers on Friday.

The BoC has left rates unchanged at 2.75% at its past three meetings.

U.S. stocks fall

At 4:00 p.m. ET (20:00 GMT), the blue-chip Dow Jones Industrial Average fell 249 points, or 0.6%, the benchmark S&P 500 fell 0.7%, and the tech-heavy Nasdaq Composite slumped 0.8%.

The main averages on Wall Street were closed on Monday in observance of the Labor Day holiday. At the end of the last trading day on Friday, stocks dipped, weighed down partially by declines in artificial intelligence-related names. Sticky personal consumption expenditure price index data also sparked some doubts over just how much impetus the Federal Reserve has to cut rates.

But, despite August being traditionally difficult for stocks, the S&P 500 gained 1.9% for the month, bringing its year-to-date advance to roughly 10% and putting the benchmark index not far from record highs. It was the latest leg higher in what has become an extended recovery in equities since an April swoon fueled by concerns over sweeping U.S. tariffs.

Traders were digesting a ruling from the U.S. Court of Appeals for the Federal Circuit late last week that most of U.S. President Donald Trump’s levies are illegal, and that only Congress held the authority to pass the duties. Trump chided the decision, saying he will appeal to the Supreme Court. 

Media reports have suggested that Trump officials have long anticipated that the high court would eventually need to settle the matter. The administration is reportedly confident that the tariffs -- and Trump’s push to assert his authority to enact them -- will eventually be supported by the court’s conservative majority.

In a note to clients, analysts at Vital Knowledge said the the appeals court decision is "at best neutral" for markets, adding it "won’t come close come close to eliminating Trump’s import taxes, and it just creates more uncertainty for Corporate America as the White House searches for a sturdier legal scaffolding for its draconian trade policy[.]"

Although a Supreme Court ruling against the tariffs may lower the prospect of tariff-related economic disruptions, such a move could herald elevated murkiness over recent trade agreements between the U.S. and its partners, which could need to be renegotiated. 

Trump’s tariffs took effect from August, with countries facing levies between 10% to as high as 50%. But a bulk of the tariffs are expected to be borne by local importers, which could underpin U.S. inflation in the coming months.

Gold hits all-time peak

Gold prices briefly touched a record high on Tuesday as persistent bets on U.S. interest rate cuts and heightened uncertainty over U.S. President Donald Trump’s trade tariffs kept traders biased towards bullion.

Broader metal prices also clocked strong gains, with silver surging to a near 14-year high, while platinum remained in sight of a 11-year high. This came as the dollar sank to a five-week low on expectations of lower U.S. rates.

Spot gold surged 1.92% to a record high of $3,583.75 an ounce, while gold futures for December hit a peak of $3,578.20/oz at 12.05 ET. 

Spot prices curbed some gains to trade 0.2% higher at $3,483.45/oz by 06:45 ET.

Oil climbs

Oil prices rose, extending the previous session’s gains, as traders weighed the risk of fresh supply disruptions from the Russia-Ukraine conflict against expanding output from OPEC+ members.

As of 12.05 ET, Brent oil futures expiring in November gained 1.19% to $68.96 per barrel, after jumping more than 1% on Monday.

Hopes for a Russia-Ukraine peace deal have dimmed after Trump last month urged Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin to hold direct talks before considering a trilateral summit hosted by Washington.

The intensified airstrikes have raised the chances of more sanctions against Russia, potentially leading to supply disruptions, which could push prices higher. The U.S. and its allies are also stepping up enforcement of secondary sanctions on Russian oil, though the measures have so far had limited impact on flows to Asia.

Partly offsetting these risks was increased production from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) in recent months, which has raised worries over a possible supply glut. Traders are now looking ahead to the Sept. 7 meeting of OPEC+ for signals on its output policy.