TSX runs higher on rate cut expectations

Investing.com - Canada’s main stock exchange bounded higher Friday, as investors focused on growth data as well as important U.S. inflation numbers.

At 1:05 ET, the Toronto Stock Exchange’s S&P/TSX composite index was higher by 149.5 points or 0.5%, having closed Thursday at a record high. The S&P/TSX 60 rose by 9.7 points or 0.6%, after closing slightly lower in the previous session.

Canadian stocks have climbed to record highs this week, boosted by solid earnings from the country’s main banks.

Attention is now on economic data, with Canada’s gross domestic product report showed a steeper-than-expected annualized decline in GDP of 1.6%, missing expectations of a 0.7% decline significantly.

The decline marked the first quarterly contraction in real GDP since Q4 2022 and was mirrored by three consecutive monthly GDP decreases through June, also a first since late 2022.

CIBC economist Andrew Grantham believes the data adds pressure on the Bank of Canada to cut rates starting in September, saying, "The main news in today’s release is actually how weak momentum still was towards the end of the quarter and into the start of Q3, even as exports had begun to stabilize. We continue to think that a couple more interest rate cuts from the Bank of Canada are needed to accelerate the recovery."

U.S. PCE in spotlight

In the U.S., the spotlight was on the release of the U.S. personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge as they seek more clarity on the path for interest rates for the rest of the year.

Data released Friday showed that the core PCE price index rose 0.3% on a monthly basis, putting the annual rate at 2.9%, its highest level in five months.

This was in line with expectations, suggesting that U.S. President Donald Trump’s sweeping tariffs were not filtering excessively into consumer prices, despite a recent upside surprise in producer inflation.

Crude set for weekly gains

Oil prices slipped lower, but are set for a weekly gain, as traders weigh uncertainty over Russian supply as well as the proximity to the end of the important U.S. summer driving season.

At 1:20 ET, Brent futures slipped 0.8% to $67.44 a barrel, and U.S. West Texas Intermediate crude futures fell 0.8% to $64.13 a barrel.

Both contracts are on course for weekly gains of just under 1%, with the lack of a meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky raising doubts about the peace process.

On a broader scale, both contracts are set for monthly losses of over 6%, dragged by steady production hikes by the Organization of the Petroleum Exporting Countries.

Gold prices jumped on Friday, adding to strong gains in August amid increasing bets on a September interest rate cut by the Federal Reserve.

Spot gold rose 1% to $3,449.32 an ounce, while gold futures for October gained 1.2% to $3,517.00/oz, as of 1:20 ET.

Spot gold was trading up 3.7% in August, and was now less than $100 away from its April record high.