TSX lower as Bank of Canada and Fed policy decisions loom large

Investing.com - Canada’s main stock exchange was lower on Tuesday, as investors awaited key upcoming central bank interest rate decisions later this week.

By 12:05 ET, the S&P/TSX 60 index standard futures contract had dipped by 7 points, or 0.4%.The S&P/TSX composite index lost 137 points or 0.47% at 29,293.23. 

Amid a torrid recent rally, index posted another all-time peak on Monday, sparked by gains in energy and technology shares. The average ended up by 0.5% at 29,431.02, surpassing a record logged on Thursday.

Looming large is a crucial Bank of Canada decision due out on Wednesday, with policymakers seen slashing rates after holding them steady at 2.75% since March.

U.S. muted

U.S. stock were muted Tuesday ahead of the start of the Federal Reserve’s own two-day policy meeting and positive signs from U.S.-China trade talks.

The Dow Jones Industrial Average dropped 60 points, or 0.1%, while the S&P 500} } index traded largely flat and the NASDAQ Composite climbed just 1 points.

The main Wall Street indices posted a winning day on Monday, with both the benchmark S&P 500 and tech-heavy NASDAQ Composite notched all-time closing highs. The former finished above the 6,600 level for the first time.

Fed meeting, retail sales in focus

Fed rate cut expectations have been driving much of this rally. Investors are widely expecting the rate-setting Federal Open Market Committee to cut borrowing costs by 25 basis points at the end of its gathering on Wednesday.

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Investors will also parse the Fed statement for clues whether this likely reduction signals the beginning of a series of cuts rather than a one‐off.

Highlighting Tuesday’s economic calendar will be U.S. retail sales data for August, which is expected to show that growth in the figure slowed.

Economists estimate that, on a month-on-month basis, retail sales rose by 0.2% last month, compared to an uptick of 0.5% in July.

Concerns remain that indications of a softening U.S. labor market in recent months could weigh on spending activity, while a gauge of consumer sentiment from the University of Michigan for September weakened to its lowest point since May as households fretted over the risk of a tariff-driven spike in inflation that could eat into their purchasing power.

U.S.-China trade negotiations

Supporting risk appetite was a fresh wave of optimism surrounding the ongoing U.S.-China trade negotiations in Madrid.

President Donald Trump posted on Monday that the “big Trade Meeting in Europe … has gone VERY WELL!”

He added that “a deal was also reached on a ‘certain’ company that young people in our Country very much wanted to save. They will be very happy!” referring to TikTok.

Treasury Secretary Scott Bessent confirmed that a framework deal was reached for TikTok’s U.S. ownership, with a call between Trump and Chinese President Xi Jinping slated for Friday to finalize details.

Crude muted

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Oil prices were subdued, handing back some of the recent gains on the back of potential disruptions in Russian supply following Ukrainian drone attacks on Moscow’s energy infrastructure.

At 12.05 ET, Brent futures dropped 1.4% to $68.39 a barrel, and U.S. West Texas Intermediate crude futures gained 1.5% at $64.47 a barrel.

Both contracts gained more than 1% last week as Ukraine stepped up attacks on Russian oil infrastructure, including the largest oil exporting terminal Primorsk and the Kirishinefteorgsintez refinery, one of the two largest refineries in Russia.

The strikes have the potential to take large amounts of Russian oil production offline, and could herald potential supply disruptions, especially for Moscow’s top markets India and China.

Gold’s new record high

Gold touched a fresh all-time peak, nearing $3,700 per ounce, bolstered by a weaker U.S. dollar prior to the Fed decision.

By 12.01 ET, spot gold was slightly up at $3,721.80 per ounce. U.S. gold futures for December moved up by 0.4% to $3,732.10/oz at 6.51 ET. Bullion jumped 1% in the previous session, surpassing record levels clocked last week.

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