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After a steady first half of the week, the TSX took a steep fall on Thursday to a five-week low.

Commodity shares in particular led the losses with investors anticipating aggressive policy tightening by global central banks.

The losses continued today, with the index down 1.56 per cent as of 1:08 pm EST due to continued weakness in commodities as well as consumer firms.

Wednesday’s data from Statistics Canada showed inflation climbed to 6.7-per-cent in March, a 31-year high, up from 5.7 per cent in February. The figure captures soaring food, energy and raw material costs due to Russia’s ongoing and unprovoked invasion of Ukraine. 

Bank of Canada (BoC) Governor Tiff Macklem delivered the first 0.5-per-cent rate hike among Group of Seven nations last week and acknowledged the possibility of a greater move at future meetings.

“We’re prepared to be as forceful as needed and I’m really going to let those words speak for themselves,” he said from Washington, where he attended meetings this week of the IMF and World Bank.

Gas prices were up 12 per cent last month and 40 per cent YoY, food prices were up 0.9 per cent last month and 7.7 per cent YoY, while grocery prices were up 8.7 per cent since March last year.

Canadian home sales posted their biggest decline since June, falling 5.4 per cent in March from the previous month and 16 per cent YoY. This is an indication of the market adjusting to higher mortgage rates, but even more so to how the national average home price was C$796,000 in March.

New listings also declined by approximately the same amount for the month. Benchmark home prices remain up 27 per cent YoY.

Canadian producer prices rose 4 per cent in March from February, the largest monthly gain since 1956.

In spite of evidence to the contrary, the BoC believes inflation will slow down to an average 4.5 per cent by Q4 2022.

Concerning our neighbours to the south, U.S. Fed Chairman Jerome Powell adopted a similar tone yesterday at an IMF panel in Washington, saying that a 0.5-per-cent interest rate increase is “on the table” when the organization meets in May and June.

The U.S. consumer price index rose 8.5 per cent YoY in March, the most since 1981, on the backs of fiscal and monetary stimulus, rising wages and employment, and a post-pandemic bounce back in consumer demand.

As central bankers prepare their policy decisions, oil suffered its third weekly loss over the past month on deflation concerns, Russian supply uncertainty, and decreased Chinese consumption due to an ongoing COVID outbreak.

An E.U. ban on Russian oil is chief among price catalysts for the hydrocarbon in the near term as it nurses a 35-per-cent gain this year despite recent weakness.

The TSX closed down by 2.14 per cent cementing its fourth consecutive week of losses. That said, the index is up over 11 per cent for the year on strength in natural resources, which is well ahead of the U.S. market’s 1.76-per-cent gain, Developed International Markets’ 8.38-per-cent loss, and Emerging Markets’ over 15-per-cent loss.

Benchmark Canadian two-year bonds have responded to economic tightening rising as high as 2.724 per cent today, the highest since 2008. 

Market movers

Over the past week, our readers have been keen on investments in the commodity and green transport spaces with the potential to outlast shifts in the business cycle:

EMX Royalty completed a C$12.58M private placement with Franco-Nevada Corporation.

NFI Group signed a contract with the Toronto Transit Commission for up to 565 buses.

Finally, Oroco Resource continues to report positive assay results from its Santo Tomas Property in Mexico.

Today’s capital raise announcements include Brookfield Infrastructure and MYND Life Sciences.

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