TORONTO – Canada’s main stock index dipped lower on Thursday as losses outweighed strength in energy stocks, while U.S. markets also moved lower.
Markets broadly moved down even as oil prices jumped more than five per cent, with tensions continuing to ramp up in the Middle East.
“Everybody’s in wait-and-see mode to see what happens over the balance of the week,” said Kevin Burkett, Portfolio manager at Victoria-based Burkett Asset Management.
The S&P/TSX composite index closed down 33.05 points at 23,968.50.
In New York, the Dow Jones industrial average was down 184.93 points at 42,011.59. The S&P 500 index was down 9.60 points at 5,699.94, while the Nasdaq composite was down 6.65 points at 17,918.48.
Israel issued more evacuation warnings in southern Lebanon amid its ground offensive into the country, while the region is bracing for Israeli retaliation after Iran’s missile attack earlier this week. Iran is a major producer of oil.
What happens next could have “stark impacts” on markets, particularly in Canada where energy and commodities are big market drivers, said Burkett.
The conflict in the Middle East is just one of several sources of uncertainty weighing on investors right now, said Burkett, in addition to Russia’s war on Ukraine, economic pressure in China sparking demand concerns, and the upcoming U.S. election.
“You’ve got all these mounting risks while we’ve got this science experiment of monetary policy happening, and so … one needs to consider not just the economic data and how the Fed or Bank of Canada might respond, but also potential overlap with some of these other known disruptive forces,” he said.
Friday will bring the latest labour market data in the U.S., a key part of the U.S. Federal Reserve’s decision-making on interest rates.
The labour market was remarkably resilient under the weight of the Fed’s rate hikes, said Burkett, but in recent months started to show softness, prompting fears that an economic soft landing might not be in the cards.
“In all but the most recent months, the labour market had remained incredibly tight,” he said.
Both the Fed and the Bank of Canada have two more rate decisions this year, and both are expected to cut twice more.
“You’ve got the U.S. and Canada now firmly in rate-cutting mode,” said Burkett.
Some market watchers think both banks could even announce an outsized cut of half a percentage point at some point this year, like the Fed did in September, he added.
The Canadian dollar traded for 73.86 cents US compared with 74.12 cents US on Wednesday.
The November crude oil contract was up US$3.61 at US$73.71 per barrel and the November natural gas contract was up eight cents at US$2.97 per mmBTU.
The December gold contract was up US$9.50 at US$2,679.20 an ounceand the December copper contract was down 10 cents at US$4.55 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Oct. 3, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
