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TSX Closer: Profit Taking Ends the Markets Eight-Straight Wins on Profit Taking as Inflation Eased Last Month
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TSX Closer: Profit Taking Ends the Markets Eight-Straight Wins on Profit Taking as Inflation Eased Last Month
Aug 20, 2024 2:12 PM

04:20 PM EDT, 08/20/2024 (MT Newswires) -- The Toronto Stock Exchange closed lower for the first time in nine sessions on Wednesday, dropping down from a record high on profit taking even as expectations firmed for a September interest-rate cut from the Bank of Canada firmed after inflation slowed last month.

The S&P/TSX Composite Index closed down 78.95 points to end the day at 23,037.44. The biggest decliners were Energy, down 2.2%, and Health Care, down 1.6%. Battery Metals was the sole gainer, up 1.76%.

West Texas Intermediate (WTI) crude oil closed lower for a third-straight session on Tuesday on weak demand from China and easing geopolitical tension. WTI crude for September delivery closed down US$0.33 to settle at US$74.04 per barrel, while October Brent crude, the global benchmark, closed down US$0.46 to US$77.20.

Gold traded at a record high late afternoon as the dollar and treasury yields moved lower on expectations the Federal Reserve is ready to begin cutting interest rates at next month's meeting of its policy committee. Gold for December delivery was last seen up US$11.30 to US$2,52.60 per ounce, setting a record high for the third-straight day.

Statistics Canada on Tuesday reported the July Consumer Price Index (CPI), with headline CPI rat 2.5% annualized in July, a 40-month low, down two ticks from June and in line with the expectations of economists. Prices rose 0.4% month over month and 0.3% after adjusting for seasonal effects.

Derek Holt, Vice-President & Head of Capital Markets Economics at Scotiabank noted core inflation "ebbed in July using the proper measure" calculated as the month-over-month percentage changes in seasonally adjusted trimmed mean and weighted median CPI at an annualized rate. They landed at 1.1% monthly SAAR for weighted median and 1.7% for trimmed mean. Traditional core CPI ex-food and energy was also soft but a touch firmer at 2.4% m/m SAAR.

Holt said the figures are volatile. He noted both of the BoC's preferred core readings were soft from January through to April before they accelerated to revised averages of 3.5% in May and 3.2% in June. Falling back to an average of 1.4% in July is "welcome relief" but "continues to merit caution along a volatile path," he added.

Holt noted there was no market effect on September rate cut expectations or the market's view that 75bps of cuts will be delivered over the three meetings in September, October and December. Scotia's forecast is for two more cuts this year including September, ending the year at 4%.

"We tentatively assume a skip in December partly based on uncertainty in the aftermath of the U.S. election, domestic data uncertainty, and the potential contents of a Fall fiscal update into an election year."

Elsewhere, Rosenberg Research said the BoC "would be well advised to bring its policy rate into alignment with underlying inflation," which would mean rolling back most - if not all - of the "unnecessary" tightening cycle in 2022 and 2023 that took the policy rate up from 1.75% pre-pandemic to the 5% peak. The labor market and inflation have done more than just "normalize," and yet, even with two rate cuts under its belt, the BoC has a very long way to go to "normalize" monetary policy, the research added.

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