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The TSX opened lower on Tuesday on fears of an expected rate hike from the Bank of Canada.

Technology and health care were down over 2 per cent in early trading, while energy dropped just over 1 per cent. 

Consensus is that The Bank of Canada will raise rates by 50 basis points to 1.5 per cent on Wednesday, with an equivalent hike expected in July.

The U.S. Federal Reserve, for its part, will begin to shrink its US$8.9 trillion balance sheet on Wednesday to tame the highest inflation in decades.

Across the pond, European consumer prices jumped to a record 8.1 per cent YoY in May, turning investors cautious at the prospect of a global economic slowdown affecting earnings.

Canada’s economic growth for Q1 failed to meet expectations, with GDP expanding just 3.1 per cent annualized due to falling oil exports. GDP is down from a revised 6.6 per cent annualized rate in Q4 2021.

Overall exports fell 9.4 per cent annualized at the start of 2022 as Canadian oil producers navigated COVID shutdowns, maintenance shutdowns and extreme cold weather.

On the bright side, domestic demand rose 4.8 per cent annualized, up from 3.7 per cent in Q4, on more robust consumption and investment.

Consumption grew 2.9 per cent annualized in Q1, up from 2 per cent in Q4. This includes restaurant and bar sales returning to pre-pandemic levels and a non-annualized rise in worker compensation of 3.8 per cent. Housing investment was also up 18.1 per cent annualized in Q1, up from 12.4 per cent in Q4.

Additionally, nominal oil output rose 3.7 per cent non-annualized due to higher wages, profits and domestic demand.

The commodity is eyeing its longest run of monthly gains in over a decade after China eased COVID lockdowns in Shanghai and the E.U. agreed to collaborate on a partial ban on Russian imports.

The E.U. sanctions would prohibit Russian oil purchases delivered by sea with a temporary pipeline exemption, making room for Asian countries, including China and India, to purchase the shunned supply.

Investors remain watchful for potential Russian retaliation should the ban come into effect.

Crude is flirting with US$120 per barrel due to Russia’s ongoing and unprompted attack on Ukraine – with invading forces now focused on the eastern city of Sievierodonetsk – coupled with rising COVID-induced demand, which will only be exacerbated by increased summer driving.

In other notable business stories:

The TSX closed down by 0.91 per cent breaking a six-day winning streak lifted by financials and commodities, generating cash as a whole and easing more scrupulous investor sentiment.

While the index is up just under 1 per cent over the past six months, the U.S. market is down 12 per cent due to a preponderance of smaller, growth-dependent tech firms whose balance sheets pale in comparison to the fortresses surrounding Apple, Alphabet, Amazon, Meta and Microsoft, all of which are down double digits year to date.

Market movers

As elevated inflation rages on and recessionary rumblings begin to spread through the Canadian market, our readers have spent the week identifying firms in technology, commodities and consumer discretionary with potential catalysts for long-term returns:

Kraken Robotics received C$1.6M in new contracts for its AquaPix Synthetic Aperture Sonar.

Rubicon Organics secured a key certification for international export.

Finally, York Harbour Metals announced a private placement for C$6.6M.

Other capital raises so far this week include The Very Good Food Company, Homerun Resources, good natured Products, Pharmadrug and Probe Metals.

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