The TSX fell on Tuesday weighed down by oil stocks tracking a dip in crude prices.
The energy sector lost 3.5 per cent in early trading as WTI fell 7.7 per cent to just over US$96 per barrel. Suncor dropped 4.75 per cent while Canadian Natural Resources shed just over 2 per cent.
Energy stocks are down almost 10 per cent in July as investors react to a potential recessionary decrease in demand compounded by China’s mass COVID testing and mobility curbs. This is in spite of tight supply due to Russia-Ukraine and post-pandemic reopenings offering oil prices considerable upside.
The materials sector, including fertilizer and precious and base metal miners, decreased by 1.5 per cent.
The TSX, indecisive over the past week, is mulling over the Bank of Canada’s rate decision on Wednesday, with consensus favouring a 0.75-per-cent hike to 2.25 per cent.
The central bank is keen on providing relief to Canadians suffering from rising prices due to 7.7-per-cent inflation. According to the latest MNP Consumer Debt Index survey, 27 per cent of participants have cut back on essentials, 37 per cent have sought cheaper everyday purchases, and 46 per cent have eschewed non-essentials such as travel and entertainment. High levels of household debt coupled with rapid cooling in the housing market are making liquidity an even greater challenge.
The U.S. will release inflation data on Wednesday, which will speak to future monetary tightening and potentially dampen earnings outlooks.
Inflation continues to soar after a global energy squeeze prompted by Russia’s invasion of Ukraine, which has raised the cost of gas, heating homes and powering industries already reeling from insatiable demand enabled by mass vaccinations. On the whole, investors are skeptical about how rising rates can remedy these industry shortfalls, many of which carry dire consequences for consumers. Ukraine alone accounts for 10 per cent of global wheat and barley exports, and 46 per cent of sunflower oil, with alternative supply routes involving untenable costs and further loss of life.
According to Fatih Birol, Executive Director of the IEA, the energy squeeze may worsen due to its unprecedented depth and complexity, reaching every corner of the globe. That said, speaking at a global energy forum in Sydney, he noted a potential silver lining to the crisis in the form of a speedier shift toward clean energy to reduce dependence on fossil fuels.
In other noteworthy news, the U.S. government expressed its support for Canada’s decision to return sanctioned Nord Stream natural gas pipeline equipment to Germany to enhance European energy security. Ukraine has criticized the decision because the pipeline, which runs between Germany and Russia, provides the Soviet nation with added leverage in the ongoing war.
Innovation, Science and Industry Minister François-Philippe Champagne has also asked Canadian telecom companies to jointly develop safeguards against major outages after hundreds of thousands of Rogers customers lost service last Friday. A coding error caused the outage during a maintenance upgrade. Connectivity problems in some areas remained unsolved as of yesterday.
Rogers is committed to its C$20B takeover of Shaw Communications and is prepared to work with regulators as necessary.
After yesterday’s 1.1-per-cent drop due to weakening commodities prices, the TSX continued the trend closing down by 0.73 per cent.
The Canadian dollar has lost about 0.35 per cent against the U.S. dollar over the past two days as recession-weary investors flock to the world’s reserve currency for their cash allocations.
Canadian bonds have given up 0.25-0.36 per cent in yield over the past month as the recently shunned asset class begins to pull its weight again to quell the worries of equity investors.
During these times of market turmoil, Market Herald Canada readers cast a wide net in their quest to identify sources of value. Here are the three most-viewed stories so far this week:
Algernon Pharmaceuticals’ (AGN) chronic kidney disease research program with NP-251 (Repirinast) has resulted in a 50-per-cent reduction in fibrosis.
Bronstein, Gewirtz & Grossman, LLC is investigating Voyager Digital for potential violations of federal securities laws.
Finally, Osisko Metals has exercised its option to acquire the Gaspé Copper Mine from Glencore Canada. The project contains a 3 billion lb. resource.