Bank of Canada cuts key rate for first time in more than 4 years
The Bank of Canada has cut its overnight rate by 25 basis points, a move not seen since the beginning of the pandemic.
Canada's main stock index edged higher Monday on a light trading day as investors awaited critical new U.S. inflation data expected later this week.
The S&P/TSX composite index was up 49.04 points at 19,669.17.
In New York, the Dow Jones industrial average was up 29.07 points at 32,832.54. The S&P 500 index was down 5.13 points at 4,140.06, while the Nasdaq composite was down 13.10 points at 12,644.46.
Inflation, and how far central banks are willing to go to tame it, is still the biggest story influencing financial markets this year. For that reason, Monday was a relatively quiet day in advance of the highly anticipated U.S. Consumer Price Index (CPI) data report, which is expected to be released Wednesday and will show how much inflation rose in the U.S. for the month of July.
Mona Mahajan, senior investment manager with Edward Jones, said she expects the report will show a slight bump in the U.S. core inflation reading, from 5.9 per cent in June to a possible 6.1 per cent for July. Any number that comes in ahead of that would provide potential rationale for the U.S. Federal Reserve to keep up a heightened pace of interest rate increases, while a lower number might soothe markets by indicating that inflation has already peaked.
“I think after this nice rally we've seen in U.S. and Canadian markets, any hint of a disappointing CPI report may be a catalyst to the downside,” Mahajan said. “But on the other end, if we get a nice move downward, it may extend the rally further.”
This week's U.S. inflation data will be coming on the heels of what was a surprisingly hot U.S. jobs report released last week. While Canada actually lost 31,000 jobs in July, the U.S. added 528,000 jobs in the month, more than double the 250,000 economists had expected.
The rapid pace of job growth south of the border is the reason a majority of analysts now expect the U.S. Federal Reserve will announce a 75-basis-point interest rate increase at its September meeting, Mahajan said, likely followed by two additional 25-basis-point increases thereafter.
She said markets no longer expect to see any potential reduction in interest rates until mid-next year, at least.
Commodity prices got a bit of stability Monday after last week's downward slide. In Canada, the mining sector got a boost from higher gold and copper prices as well as strong second-quarter earnings from Toronto-based Barrick Gold Corp, which saw its profits for the quarter surge almost 20 per cent since last year.
The December gold contract was up $14 at US$1,805.20 an ounce and the September copper contract was up three cents at US$3.59 a pound.
The September crude contract was up $1.75 cents at US$90.76 per barrel, after falling last week to below $90 per barrel for the first time since the Russian invasion of Ukraine in February.
The September natural gas contract was down 48 cents at US$7.59.
Second-quarter earnings continue to roll in this week both north and south of the border. So far, the earnings season has been better than many analysts expected, an indication that inflation hasn't yet had a significant impact on company profits.
But Mahajan pointed out that second-quarter earnings reports are a lagging indicator that don't reflect the full impact of recent central bank hikes.
“Keep in mind that earnings are backward-looking,” Mahajan said. “In Q2, we hadn't really gotten any real quantitative tightening in play yet, and we still saw a bit of softening (in profits) across the board. So we think while earnings have generally held up well, we could see further softening ahead given that lag time impact.”
The Canadian dollar traded for 77.78 cents US compared with 77.32 cents US on Friday.
This report by The Canadian Press was first published Aug. 8, 2022.
The Bank of Canada has cut its overnight rate by 25 basis points, a move not seen since the beginning of the pandemic.
The Hospitals of Regina Foundation (HRF) issued an official apology on Wednesday following comedian Rob Schneider's set at a fundraising event on Saturday night.
If an Oilers fan in Edmonton has the spare time, they can not only potentially witness their hockey heroes win and take a step closer to claiming puck glory, they can brag that they journeyed the longest distance between two NHL markets to do it.
Air Canada is now offering free beer and wine on flights within Canada and the U.S. until the end of the year.
Billionaire Elon Musk is questioning diversity and inclusion hiring practices, using the social media platform he owns to criticize a job posting from the University of British Columbia.
Five people associated with the Hells Angels motorcycle gang are facing charges after police raided two homes and two unlicensed bars in Waterloo Region.
President Vladimir Putin warned Germany on Wednesday that the use of its weapons by Ukraine to strike targets inside Russia would mark a 'dangerous step.'
McMaster Children’s Hospital is pausing scheduled tonsil and adenoid surgeries for patients under the age of 18 after officials say two pediatric patients who underwent the procedure died shortly after being discharged.
It was Conservative Leader Pierre Poilievre’s birthday on Monday, but he could've probably done without the package that one of his more obscure backbenchers dropped on his doorstep, writes former NDP leader Tom Mulcair in his latest column for CTVNews.ca.
Marking a milestone, Lakeshore resident Olga White celebrated her 107th birthday in style Wednesday.
The municipality of Tantramar, N.B., is holding a sale to get rid of surplus items it acquired after the Town of Sackville amalgamated with smaller communities last year.
For several weeks, a mysterious social media user has apparently been leaving $50 bills hidden across Metro Vancouver.
A statue dedicated to the Royal Regina Rifles Regiment has been officially unveiled in France just ahead of the 80th anniversary of D-Day.
A Cape Breton is this year's recipient of the McEuen Scholarship, which gives him basically a full ride to the medical school at the University of St. Andrews in Scotland.
Mounties in Kelowna nabbed a would-be burglar with an apparent sweet tooth over the weekend.
When Alyssa Anklewich’s history teacher assigned her Westwood Collegiate class an essay about D-Day, the 15-year-old had other ideas.
Many people are familiar with the benefits of being in nature, but forest therapy goes a step further than a simple walk in the woods.
The Stanley Cup was passing through town Friday, and Lanny Legend took it upon himself to take it for a surprise visit.