Wall Street, Bay Street and the bond market all spent Tuesday waiting on inflation. The S&P/TSX Composite slipped to about an eight-week low, U.S. Treasury yields pushed to multi-decade highs, and a sharp drop in oil prices weighed on energy stocks while easing some inflation worries. Today brings the Fed's favourite inflation gauge, and it could decide whether October brings another rate hike.
The Big Picture
U.S. consumer confidence sank to its lowest level since 2014, the loonie sits near a 12-week low, and markets are split on whether the Fed hikes again on Oct. 28. Today's PCE report at 8:30 a.m. ET is the next big test.
Canada: TSX Drifts Lower, GDP Stalls
| Index | Close | Change | Notes |
|---|
| S&P/TSX Composite | 35,460.27 | -0.08% | -29.59 pts (unofficial close); about 4.3% below the August record of 37,069.11 |
| TSX Venture | 887.30 | -0.78% | -6.94 pts |
The TSX gave up another 29.59 points on Tuesday after Monday's 311-point (0.87%) slide, which had already taken it to its lowest close in about eight weeks. Telecoms, energy and consumer staples led the declines, and losers outnumbered winners roughly 545 to 411. Energy names fell with crude: Enerflex dropped 4.2% and Whitecap Resources shed 2.9%. For September so far, the index is down about 2.2% from its Aug. 31 close of 36,270.48. The TSX is open for trading today, even though it is the National Day for Truth and Reconciliation and there is no settlement.
The economic data was soft but expected. Statistics Canada said GDP was flat in July, ending a three-month run of growth, though June was revised up to 0.4% and an advance estimate points to a 0.2% gain in August (mining and retail led). BMO's Benjamin Reitzes noted third-quarter growth is tracking in line with, or slightly above, the Bank of Canada's 1.5% annualized forecast. That keeps the central bank's Oct. 28 decision a close call, with swaps pricing roughly even odds of a hike to 2.50%.
The bigger story for many Canadians is the dollar. The loonie touched 1.4201 per U.S. dollar on Tuesday, its weakest since July 8, before settling near 1.4175 (about 70.5 U.S. cents), as the greenback climbed to a two-month high on Fed hike bets.
Trade Watch
The U.S. ban on select Canadian imports, including many alcohol products, whey, molasses, motorcycles and some dairy, took effect just after midnight Tuesday. President Trump says he expects Ottawa to concede in the coming weeks, while Canadian officials say they will not sign a bad deal. Canada's $27.6 billion in retaliation tariffs from Sept. 8 remain in place.
U.S. Markets: Yields Steal the Spotlight
| Index | Close | Change | Notes |
|---|
| Dow Jones | 51,349.92 | -0.26% | -131.59 pts; down about 3.5% in September |
| S&P 500 | 7,670.84 | -0.17% | -12.85 pts; roughly flat for the month |
| Nasdaq | 26,797.54 | -0.09% | -22.84 pts; still up more than 1% in September |
Stocks finished modestly lower in a narrow range for a second straight session, with rising bond yields undercutting gains in big tech. The 10-year Treasury yield ended near 5.28% and the 30-year around 5.6%, after touching the highest levels in more than two decades earlier in the session. Yields eased off their highs after New York Fed President John Williams said policymakers do not need to “rush” into another hike, which cut CME FedWatch odds of an October increase to roughly 45–50%, from about 70% a day earlier. Fed Governor Michael Barr, however, again argued that more tightening is needed.
The economic data leaned weak. The Conference Board's consumer confidence index fell 6.7 points to 81.9 in September, its lowest since 2014 and well below the roughly 89 economists expected. Its Expectations Index dropped to 63.6, below the 80 level that the group says usually signals a recession within a year. Job openings slipped to 7.08 million in August from 7.34 million in July. The Fed's target range is 3.75%–4.00% after the Sept. 16 hike.
Today's calendar: ADP private payrolls (8:15 a.m. ET), then Q2 GDP (third estimate) and August personal income and spending with the PCE price index at 8:30 a.m. ET. Core PCE is forecast to rise 0.3% month over month. Micron reports after the close. U.S. stock futures were pointing higher this morning, and Friday's September jobs report is the next major event.
Europe: Shares Slip, September Turns Negative
| Index | Close | Change | Notes |
|---|
| STOXX 600 | 638.08 | -0.09% | Gave up gains of as much as 0.7%; first monthly decline in six months |
| FTSE 100 | ~10,637 | -0.45% | Energy and staples weighed |
| DAX | ~25,399 | +0.10% | Roughly flat on the day |
| CAC 40 | ~8,036 | -0.53% | Lindt fell 8.7% on a second forecast cut |
European shares closed lower as elevated bond yields outweighed a chip-stock rally driven by AI-spending optimism. Energy and food and beverage stocks fell about 1.4% each as oil retreated. The STOXX 600 is down close to 2% for September and on track for its first monthly loss since March.
Asia-Pacific: Japan Leads, Korea Lags
| Index | Close | Change | Notes |
|---|
| Nikkei 225 | 66,753.72 | +1.9% | SoftBank up more than 6% on AI/chip optimism |
| Kospi | 6,838.04 | -0.5% | Down about 18.8% in Q3 as AI trades unwound |
| Hang Seng | 24,613.10 | +0.4% | China's official PMIs rose above 50 |
| Shanghai Comp. | 3,842.19 | +0.3% | Modest gain |
Japan bucked the regional trend, with the Nikkei climbing despite weak industrial output data and helped by chip and AI names. South Korea's Kospi finished a rough quarter, and Australian inflation ran at 4.0% year over year in August, keeping rate-hike talk alive in Sydney.
Oil, Gold and Rates
| Market | Level | Change | Notes |
|---|
| Brent crude (Nov) | US$102.59 | -2.6% | Still up about 13% in September; Nov contract expires today (Dec: US$96.16) |
| WTI crude (Nov) | US$89.38 | -3.5% | Up about 4% for the month |
| Gold (spot) | ~US$4,185 | +1.4% | Bounced after Monday's 3% drop to a 7-week low; about C$5,930/oz |
| USD/CAD | ~1.4175 | +0.2% | Loonie about 70.5 US cents; touched 1.4201, weakest since July 8 |
| U.S. 10-yr yield | ~5.28% | +4 bps | 30-yr near 5.6%, highest in more than two decades |
| Canada 10-yr yield | 3.999% | +3.2 bps | Near a three-year high; 2-yr at 3.374% |
Oil sank on Tuesday as four things landed at once: Saudi Arabia resumed tanker loadings at Yanbu after restoring about half the capacity of its East-West pipeline, the U.S. offered up to 40 million barrels from its Strategic Petroleum Reserve, Qatar said it is mediating between the U.S. and Iran, and The Atlantic reported that President Trump backs easing some Russia sanctions in exchange for prisoner releases. Trump also said he has offered Iran nothing to end the war, so the risk premium hasn't gone away. Note that the front-month Brent contract expires today, so quotes may show the lower December price.
Gold recovered part of Monday's slide as weak U.S. data cooled some Fed hike bets, but it is still down roughly 6–7% in September as higher yields pressure the metal.
What It Means for You
Mortgages: Fixed rates follow Government of Canada bond yields, and the 10-year sits near a three-year high, so don't expect a quick break if you're renewing. Variable-rate holders should watch Oct. 28.
Travel and U.S. shopping: At about 70.5 US cents, a US$1,000 purchase costs roughly C$1,418. Consider locking in U.S. dollars early for fall trips.
Gas prices: Crude's 3% drop helps, but Brent is still up about 13% this month and pump prices tend to fall slowly.
Investments: A 2% monthly dip is normal volatility. Quarter-end rebalancing can add noise today, so avoid reacting to a single session.
What to Watch Next
- Today: U.S. ADP, Q2 GDP and PCE inflation (8:15–8:30 a.m. ET); Micron earnings after the close.
- Thursday, Oct. 1: Markets reopen to a new quarter.
- Friday, Oct. 2: U.S. September jobs report.
- Oct. 28: Bank of Canada and Federal Reserve rate decisions.
Market figures are based on Tuesday's closing data and Wednesday's Asian closes from Reuters, CP, CNBC, BNN Bloomberg, Investing.com and other public sources. The TSX close is unofficial and may be revised slightly. European figures marked with ~ are approximate. This article is for information only and is not financial advice. MoneySavings.ca is not a registered investment advisor.
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