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MTrading Team • 2024-01-17

Falling Oil and Gold Prices Make the Canadian Market Pull Back

Falling Oil and Gold Prices Make the Canadian Market Pull Back

Tuesday saw a decline in Canada's major stock index as the market gave up some of its recent gains due to lower commodity prices. As a result, it weighed on resource companies and domestic inflation data, which dimmed expectations of an early rate decrease by the Bank of Canada.

The S&P/TSX composite index of the Toronto Stock Exchange closed at 20,948.09 (113.79 points lower), or 0.5%. It reached a 20-month high of 21,074.91 the previous week.

Experts say a likely scenario is that this is a slight upset following a big move. The decline will not last for long followed by new heights. On the one hand, market participants expect falling interest rates soon. On the other hand, we may foresee increasing earnings growth. Both have a positive impact on the overall market sentiments.

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The previous month showed up to be quite negative for Canada. The annual inflation rate approached 3.4%. Although that was anticipated, some investors became uneasy due to an increase in the underlying pricing pressures.

The probability that the Bank of Canada will reduce interest rates in March is quite low (actually, 1 in 3), compared to almost 50% before the data release. However, some market participants are still speculating that the first rate cut will take place no sooner than April.

Meanwhile, the oil price closed 0.4% lower at $72.40 per barrel. The energy sector saw a 3.1% decline. Gold fell 1.3% as well, while the materials group, which includes companies that mine basic and precious metals and provide fertiliser, lost 2.3%.

Commodity prices fell as well. The decline was triggered by the falling greenback. The consumer staples sector is the only one to provide a kind of ballast thanks to its recent 0.5%-gain.

May the trading luck be with you!