Essential Insights for Canadian Investors Before the Bell
Investors should exercise caution as global markets are influenced by ongoing trade tensions and rising inflation figures. Recent threats from U.S. President Donald Trump regarding additional tariffs on European countries have unsettled equities, particularly in North America.
Market Reactions and Tariff Threats
Following President Trump’s tariff remarks, the Toronto Stock Exchange (TSX) futures dropped, reflecting a broader decline in investor sentiment. The pan-European STOXX 600 index saw a decrease of 1.21% during morning trading. Other notable declines included:
- Britain’s FTSE 100: down 0.48%
- Germany’s DAX: down 1.29%
- France’s CAC 40: down 1.5%
- Japan’s Nikkei: down 0.65%
- Hong Kong’s Hang Seng: down 1.05%
George Lagarias, chief economist at Forvis Mazars, noted that markets are responding to the ongoing tariff threats, which could become a consistent tactic by the White House, even when trade deals are in place.
Inflation Figures and Market Considerations
In Canada, inflation data revealed a faster-than-expected annual increase of 2.4% in December, primarily driven by a base-year effect from the previous year’s sales tax reduction. This marks a shift in expectations, as many forecasted that inflation would stabilize at around 2.2%. On a related note, core inflation measures have cooled for three consecutive months.
Commodities Update
Commodity prices also reacted to the geopolitical climate. Oil prices slipped as tensions in Iran eased, lowering the risk of disruptions to supply. Brent crude futures fell by 0.62% to $63.79 per barrel, while West Texas Intermediate (WTI) for February dropped 0.74% to $59 per barrel. The active March contract traded at $58.98, declining by 0.61%.
On the other hand, gold prices surged. Spot gold reached a high of $4,662.85 per ounce, a significant increase from its previous peak of $4,689.39. U.S. gold futures for February delivery were up by 1.6% to $4,668 per ounce.
Currency and Economic News
The Canadian dollar strengthened, trading at approximately 72.01 U.S. cents, an increase of 0.2% for the day. Despite this, the Canadian dollar has seen a decline of about 1% against the U.S. dollar over the past month. Other currency movements included:
- U.S. dollar index: down 0.26% to 99.14
- Euro: up 0.19% to $1.1631
- British pound: up 0.23% to $1.3410
The U.S. bond market remained closed due to the Martin Luther King Jr. holiday. Investors are encouraged to stay alert as economic reports from China and Canada are expected, focusing on GDP, retail sales, and inflation statistics.
Key Upcoming Economic Reports
Tomorrow’s reports of interest include:
- Canadian CPI for December: Annual inflation expected to rise to 2.4%.
- Canadian new motor vehicle sales for November: Estimated year-over-year drop of 9.5%.
- Canadian household and mortgage credit for November.
- Bank of Canada’s Business Outlook Survey and Consumer Expectations for Q4.
In summary, Canadian investors should prepare for significant market movements influenced by inflation data, ongoing trade negotiations, and shifting commodities prices. Staying informed on these developments is crucial for making sound investment decisions.
