Canada’s main stock index is expected to open on a cautious note

The S&P/TSX Composite Index is expected to open on a cautious note following the recent market sell-off, reflecting lingering weakness in investor sentiment amid geopolitical tensions. In the previous session, losses were primarily led by the basic materials and technology sectors, adding to overall selling pressure.

From a technical standpoint, the index continues to trade below a key rising trendline resistance near 32,700, signalling persistent near-term weakness in the market structure. As long as the index remains below this level, downside risks may persist, potentially leading to extended consolidation or further corrective movement. Immediate resistance is seen near 32,700, and failure to reclaim this level could keep the broader tone defensive in the near term.

Global Macro Backdrop

Global markets traded cautiously overnight, reflecting ongoing concerns over inflation and growth:

• U.S. economic updates showed moderate expansion in retail sales, while producer prices cooled slightly, suggesting inflationary pressures may be easing. Traders are weighing whether the Fed will continue with a patient stance on interest rates.
• European markets were mixed, with the STOXX 600 slipping slightly after industrial output data missed expectations, offset by gains in defensive sectors.
• Asian markets posted modest gains, supported by strong manufacturing activity in China and Japan, but geopolitical tensions remain a watchpoint.

Bond yields are moving higher in response to inflation expectations and robust economic data, influencing rate-sensitive sectors globally.

Macro News Impacting the TSX

The TSX Composite will be influenced by U.S. macro trends, commodity prices, and the Canadian dollar.

• Bank of Canada watchers remain focused on inflation, employment, and housing data for hints on future rate adjustments.
• Investors are balancing domestic macro indicators with global growth prospects, which will influence near-term sector rotation on the TSX. 

Commodity view — what to watch

• Crude oil: WTI crude futures held above $97 per barrel on Thursday, extending gains as fresh attacks on key energy infrastructure in the Middle East heightened concerns over disruptions to global oil and gas flows.
• Gold: Gold dropped to around $4,710 per ounce on Thursday, declining for the seventh session to hit a nearly six-week low, as the Federal Reserve’s hawkish outlook weighed on its non-yielding appeal. 
• Base metals: Copper futures fell below $5.5 per pound on Thursday, hitting a three-month low amid a sharp rise in exchange inventories, signaling softer physical demand. 

Sector highlights

• Energy: Canadian oil producers may see supportive trading as oil prices remain firm.
• Materials: Gold and base metal miners may see active trading depending on commodity trends and global demand.
• Financials: Banks remain sensitive to bond yield movements and interest rate expectations.
• Technology: Tech stocks track U.S. market sentiment and global growth expectations.

Forex watch

• The Canadian dollar (CAD) is relatively steady versus the U.S. dollar, influenced by oil prices and U.S. macro data.
• Currency fluctuations will impact export-oriented sectors and commodity producers. A stronger CAD can pressure exporters but often boosts investor confidence in domestic financials.

Bottom line:

The TSX Composite is likely to open cautiously, with investors balancing macroeconomic signals, commodity trends, and currency movements.

Energy and materials stocks are expected to provide early direction, while financials and technology sectors may track interest rate expectations and global equity sentiment. Commodity momentum, especially in oil and gold, will be closely watched by market participants for indications of broader market direction.