'Hat Trick' of Losses Sees TSX Lose More Than 500 Points In 3 Days; Eyes of the World Appear To Be on Bank of Canada

Last Updated: Tuesday, December 6, 2022 4:15 PM | MT Newswires

There are positive 'hat tricks' -- say that of Goncalo Ramos in scoring three goals for Portugal in the soccer World Cup on Tuesday. And there are negative 'hat tricks' -- like the three days of successive losses for Canada stocks, resulting in a decline of more than 500 points in total.

Uncertainty around what will be an endpoint to North American, and specifically Canadian, rate hikes continued to weigh on investor sentiment into today, with participants sending the nation's main stock market down another near 250 points, adding to the more than 280 points lost over the prior two sessions and leaving the Toronto Stock Exchange back near the 20,000 level.

Lower oil prices also likely weighed on the resources heavy index. The Energy sector was among the biggest losers.

Three days of losses now leaves the TSX needing to gain 1,000 points for it to meet BMO Capital Markets' "more realistic" year end target for it of 21,000. The TSX was actually still above the 20.500 level near 3pm last Friday, which is about the time that some economists, Doug Porter at BMO included, stated they were wary on the issue of an endpoint for rate hikes.

All of this means the eyes of the economics world will be on Ottawa, Wednesday, when the question of whether the Bank of Canada raises its key benchmark rate by 25 or 50 basis points will almost be secondary -- people are going to be more concerned about looking for clues as to how many more hikes might be coming. National Australia Bank noted the BoC decision is set to be a close call with analysts split between a 25 and a 50bp hike. It said market pricing was leaning in favour or 25, with 31bp priced.

National Australia Bank in its 'Morning Call Podcast' -- sent via an email that reads 'No surprises from RBA, But BoC on a knife-edge' and made available Tuesday afternoon North America time -- noted US and European equities had "taken another hit" today. NAB's Ken Crompton said markets continue to respond to the strong jobs data from the US on Friday and look at what that means for terminal Fed rates. The NAB podcast noted there were no surprises from the Reserve Bank of Australia yesterday -- the RBA hiked the overnight cash rate by 25bp, taking the OCR to 3.1%, its highest level since 2012 -- with NAB's Ivan Colhoun saying that central bank is "very cognisant of lags in monetary policy, so it's too early to expect any pause in the first part of next year". Then in terms of this nation, NAB noted "it's a different story for the Bank of Canada...who front-loaded hikes and the question is how close are they to reaching the end of their tightening cycle?"

Of commodities today, West Texas Intermediate crude oil closed at the lowest in nearly a year on Tuesday as recession worries continue to overhang the market after unexpectedly robust US economic reports released a day earlier raised concerns the Federal Reserve may resort to another outsized interest-rate hike when its policy committee meets next week. WTI crude for January delivery closed down $2.68 to settle at US$74.25 per barrel, the lowest since Dec.24. February Brent crude, the global benchmark, was last seen down $3.09 to US$79.59, while Western Canada Select was down $3.00 to US$46.05 per barrel.

Gold managed a small gain on Tuesday even as the dollar and bond yields rose on unexpectedly robust economic reports released Monday. Gold for February delivery closed up $1.10 to settle at US$1,782.40 per ounce.

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