12:15 PM EDT, 09/04/2024 (MT Newswires) -- The Toronto Stock Exchange, which opened 20 points lower, is now 34 points higher, to 23, 077.

As expected, the Bank of Canada cut its key benchmark interest rate by 25 basis points to 4.25%, making it the third straight interest rate cut.

Oil prices fell to a nine-month low early on Wednesday, weakening from overnight highs that came after reports OPEC is reconsidering plans to restore 180,000 barrels per day of 2.2-million bpd of voluntary production cuts beginning next month.

Gold prices edged down again, continuing a correction from last week's record high even as the dollar weakened.

But natural gas traded rose to a two-month high despite mild temperatures forecast for major markets as supply tightens.

While most market focus in Canada was on the BoC's rate decision, we did also get July trade data. CIBC noted Canada's goods trade balance improved in July, albeit from a weaker than first reported prior month and "not necessarily for the right reasons". The $0.7 billion surplus was close to consensus expectations, but followed a $0.2 billion deficit in the prior month (originally a +0.6 billion surplus). The improvement relative to the prior month occurred because exports (-0.4%) fell by less than imports (-1.7%), "which is not exactly a positive sign for growth". It's less of a surprise from these data, therefore, that the advance estimate of July GDP pointed to only a flat reading, CIBC added.

In terms of U.S. data, CIBC noted the July JOLTS report provided "yet another sign of a labor market that is cooling". Job openings took a "meaningful step down" in the month, coming in at 7673K, below the consensus view of 8100K. The prior month was revised down from 8184K to 7910K.

"Overall," CIBC said, "the message from JOLTS is a pretty clear: the jobs market is gradually cooling and although it is not broken, where it will be in next six months to a year without material help from the Fed is a big question mark. We expect payrolls to be solid on Friday and the Fed to deliver three quarter point rate cuts at every meeting this year, alongside a dovish dot plot."

But in terms of the main economic news of the day, Rosenberg Research noted that while there surely are more cuts to come in Canada, the tone of the BoC's press statement was less dovish than was the case back on July 24. The research noted there were a few caveats, like wage growth remaining "elevated relative to productivity" and that beyond shelter, "inflation also remains elevated in some other services." The Bank noted for a second time that "price increases in shelter and some other services are holding inflation up." Rosenberg Research said: "All attempts here to keep the markets from getting too carried away with the extent of future interest rate relief."

But, Rosenberg Research noted, words are still pretty powerful, with the BoC statement reading that "economic activity was soft through June and July" and "the labour market continues to slow, with little change in employment in recent months". This, the research said, is not the message from any central bank that rate cuts are over. The Canadian economy is "on a very shaky foundation", as absent the population boom, the economy would be contracting at a -2.4% annual rate, it added.

If you're wondering where the final destination point on this interest rate journey is, Rosenberg Research said consider this: "The share of components of the consumer price index growing above 3% is roughly at its historical norm." The research noted the labor market has normalized and so have the inflation indicators. But the policy rate still has a long way to go even after these cumulative 75 basis points of cuts to date. What, the research asked itself, is "normal" for the overnight rate? Try 2.3% over the past five years, 1.6% over the past 10 years, and 1.8% over the past 20 years, it answered. "So," Rosenberg Research added, "Mr. Macklem and crew, you still have a long way to go before the bottom in rates is in. There still is opportunity here in the bond market seeing as investors have priced in a terminal rate closer to 2.75%. As for the Canadian dollar -- rallies are to be rented as the fundamental trend will weaken over time."