Stock markets fell for another week in a row as the US war on Iran continues
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Canadian and US store The market fell on Friday amid fears of the impact of the US-Iran war on interest rates.
Dustin Reed, vice president and chief fixed income strategist at Mackenzie Investments, said markets are seeing a risk-off move amid higher energy prices and inflationary risks.
“You are seeing the central bank raising prices going further in that direction. So it’s certainly having a pretty significant impact on all asset classes and equities are no exception,” he said.
The S&P/TSX composite index was down 537.57 points at 31,317.41.
The Dow Jones Industrial Average in New York was down 443.96 points at 45,577.47. The S&P 500 index was down 100.01 points at 6,506.48, while the Nasdaq Composite was down 443.08 points at 21,647.61.
Concerns have grown so high that traders have canceled almost all of their bets that the US Federal Reserve could cut interest rates this year, according to data from CME Group. Some even think the Fed could raise rates in 2026, a scenario that was almost unimaginable before the war started.
Lower interest rates will boost the economy and investment prices, and these are something US President Donald Trump has been angrily calling for. Before the war, traders were betting heavily that the Fed would cut rates at least twice this year.
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But low rates risk worsening inflation. And investors now see little scope for central banks around the world to cut interest rates to help their economies. Apart from the Federal Reserve and the Bank of Canada, central banks in Europe, Japan and the United Kingdom also kept their interest rates steady last week.
The May crude oil contract was up US$2.68 at US$98.23 per barrel.
The price of Brent crude has fallen sharply from around US$70 per barrel before the war started, to US$119.50 this week. Big swings are occurring hourly as financial markets try to gauge how long the war will last and how much damage it will cause to oil and gas production in the Persian Gulf.
“I think if we’re at $120 (U.S.) a barrel in Brent for several weeks or more than a month, we’ll probably start to move away from this inflation theme and move to (questions about) what it means for global growth, what it means for corporate earnings … so it will be a different macro trading environment at that time,” Reed said.
‘The Canadian dollar has… done OK,’ strategist says.
store Markets have a history of bouncing back relatively quickly from past conflicts in the Middle East and elsewhere, unless oil prices remain high for too long.
in canadian store marketMost sectors were in negative territory, with basic commodities serving as the largest weight. Consumer was the only sector in non-cyclical positive territory.
The Canadian dollar traded at 72.90 cents US, compared with 72.84 cents US on Thursday.
“It’s perhaps no surprise that the Canadian dollar has recovered — better than fine — over the past few weeks, broadly keeping pace with the US dollar, which has seen a fairly significant amount of safe-haven investment flows,” Reid said.
