04:17 PM EDT, 04/16/2024 (MT Newswires) -- Indications and strong rumors that the Federal Liberals were set to raise taxes on wealthy Canadians and some corporations had the TSX's S&P/TSX Composite Index down 160 points in early trading, but did recover ground to finish the day down 99.73 points to 21,642.87 just as the budget was released.

The biggest gainers were Info Tech and Healthcare, up 1.168% and 0.851% respectively; followed by Energy, up 0.688%.

Utilities and Battery Metals were the biggest decliners, down 1.153% 0.848% respectively.

West Texas Intermediate (WTI) crude closed with a small loss on Tuesday on easing fears of a wider war in the Middle East, while China, the No.1 importer, said its economy grew more than expected in the first quarter.

WTI crude oil for May delivery closed down US$0.05 to settle at US$85.36 per barrel, while June Brent crude, the global benchmark, closed down US$0.08 to US$90.02.

Gold prices rose on Tuesday, pushing above the US$2,400 mark as buying momentum for the metal continues even as treasury yields rise and the dollar appreciates.

Gold for June delivery was last seen up US$23.40 to US$2,406.40 per ounce, moving back above the US$2,400 mark it failed to hold last week.

With trading done for the day, many stock pickers are now likely to have turned their attention immediately to the release of the Federal Budget from the governing Liberals, although Finance Minister Chrystia Freeland has already flagged many of the housing and affordability measures that will be included in the document.

But the Globe and Mail newspaper is reporting that the government will make tax changes in Tuesday's budget aimed at raising more revenue from wealthy Canadians and certain corporations, according to three sources with direct knowledge of the spending plan.

The tax changes for individuals will affect a group of people smaller than the top 1% of earners, the sources said. According to the newspapers, the sources did not provide any details on what income levels would be subject to the tax changes. They also did not specify which sectors would be targeted through the corporate changes.

Market watchers have already had economic news to digest even before the trading day began, with the release of inflation data for March.

Derek Holt, Vice-President & Head of Capital Markets Economics at Scotiabank, noted the average of trimmed mean and weighted median CPI was 1.25% month over month SAAR. Holt noted the Bank of Canada's favoured core measures were soft again in March, but other core measures not so much.

"This is encouraging, but still just three months of softness... with a lot of ground to cover before the June meeting," he said in the summary of a note entitled "More Progress, More Needed."

The Globe and Mail noted implied probabilities in the swaps market were showing 57% odds of the bank cutting interest rates in June, up from 43% prior to the 8:30 a.m. ET data, according to Refinitiv Eikon data.

The paper also noted the odds of a cut have increased to about 84% for the July monetary policy decision, up from 72%.

Money markets are pricing in a full 50 basis points of easing by this October.

On rates, Goldman Sachs in a note published just before the close of trade today said following the higher-than-expected U.S. March CPI, it has pushed back its call for quarterly Fed cuts starting to July 31, with risks tilted to the later side.

But Goldman Sachs added it still feels "comfortable with the disinflation narrative because of special factors in the recent inflation numbers, well-anchored inflation expectations, and continued labor market rebalancing."

Elsewhere in G10, Goldman expects the BoC, the ECB, and the BoE to start easing in June, with three consecutive cuts up front and a shift to quarterly cuts in Q4.

TD Economics noted headline CPI inflation moved slightly higher in March to 2.9% year-on-year (y/y), matching expectations.

According to TD, one piece of good news was softer goods inflation, which dipped from 1.2% y/y in February to 1.1% y/y in March. Consumers are also seeing lower inflation for food, which is at 3.0% y/y in March, down from a peak of 10% last year.

The bigger piece of good news, TD said, was that the Bank of Canada's preferred 'core' inflation measures were "very soft" in March and are now only running at an average of 1.3% annualized over the past three months, and 2.4% annualized over the past six months. This has helped take year-on-year core inflation down again in March, averaging 3% y/y versus from 3.1% in February.

CIBC said financial markets had been thinking there was a 50-50 chance of a June cut before today's data, but added that probability rose to around 65% following the "benign" March CPI data release. That saw bond yields and the loonie fall.

CIBC noted inflationary pressures in Canada remain weaker and more concentrated in specific areas (like shelter) than in the U.S., which it said makes sense given weaker consumer spending here. It added: "That should justify a first interest rate cut from the Bank of Canada in June, provided the next CPI release doesn't show a sizeable re-acceleration in core measures. However, a weakening currency complicates matters somewhat and could restrict how many cuts the Bank feels comfortable delivering before the Fed also starts trimming rates later in the year."