Canada’s main stock index opened lower on Tuesday, tracking losses on Wall Street due to a hotter-than-expected U.S. inflation reading and fading hopes of a U.S.-Iran peace deal.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 0.07 per cent at 34,113.67 points.
In New York, the Dow Jones Industrial Average rose 35.2 points, or 0.07 per cent, to 49,739.62. The S&P 500 fell 22.2 points, or 0.30 per cent, to 7,390.63, while the Nasdaq Composite dropped 187.1 points, or 0.71 per cent, to 26,087.009 at the opening bell.
U.S. consumer prices rose at a brisk pace for a second straight month in April, pushing annual inflation to its highest level in nearly three years and reinforcing expectations that the Federal Reserve will keep interest rates unchanged for longer.
The Consumer Price Index increased 3.8 per cent last month on an annual basis, while economists polled by Reuters had expected a 3.7-per-cent rise.
“We believe the financial markets have been a little slow to appreciate the economic damage that is building with higher prices, oil prices, raw materials, all those things that could accelerate global inflation,” said Doug Beath, global equity strategist, Wells Fargo Investment Institute.
“April had the highest S&P 500 returns since 2020. Obviously, earnings continue to exceed expectations. But I do think even though it (CPI)is a little bit higher than expected, it could be more important because of the fact the negotiations are still in limbo.”
President Donald Trump said a ceasefire with Iran was “on life support” after Tehran rejected a U.S. proposal to end the conflict, keeping oil prices elevated as the key Strait of Hormuz shipping route remained closed.
Although a strong earnings season has helped bolster market sentiment, the lack of progress in negotiations between Washington and Tehran remains a concern for market watchers as surging oil prices fuel worries of higher inflation.
Ahead of the war, traders had expected two rate cuts, per CME Group’s FedWatch Tool, but currently expect the Federal Reserve to keep interest rates steady through the end of the year.
Producer prices and retail sales data are also due this week, with investors turning to macroeconomic cues as the first-quarter earnings season draws to a close.
All three major U.S. stock indexes advanced on Monday, with the S&P 500 and the Nasdaq notching fresh record closing highs, supported by continued optimism around artificial intelligence and the health of Corporate America.
Elsewhere, in Europe at midday, France’s CAC 40 slipped 0.6 per cent, while the German DAX dipped 1.1 per cent. Britain’s FTSE 100 shed 0.5 per cent.
In Asia, Japan’s benchmark Nikkei 225 added 0.5 per cent to finish at 62,742.57. South Korea’s Kospi dropped 2.3 per cent to 7,643.15, in what analysts are categorizing as fallout from overreliance on fraying AI hopes.
“Global equities remain dangerously dependent on a tiny cluster of AI leaders, creating a rally structure that looks powerful on the surface but increasingly fragile underneath,” said Stephen Innes, analyst with SPI Asset Management.
He believes South Korea may be among the first major economies that will undergo what he called “the political redistribution phase of the AI boom.”
Australia’s S&P/ASX 200 dipped 0.4 per cent to 8,670.70. Hong Kong’s Hang Seng lost earlier gains and fell 0.2 per cent to 26,347.91, while the Shanghai Composite lost nearly 0.3 per cent to 4,214.49.
Reuters and The Associated Press
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