Oil prices extended gains toward their largest ever monthly increase on Monday, as major Wall Street indexes were mixed in choppy trade and investors focused on the war on Iran that they fear will drive inflation and raise the risk of recession across the globe. Canada’s main index ended modestly lower after trading positively earlier in the session.
U.S. and Canadian government bond yields declined across the curve as mounting global growth concerns eclipsed inflation worries. Investors are increasingly uneasy about a war entering its fifth week with no clear path to resolution.
Trump said the U.S. was in serious discussions with a “more reasonable regime” to end the war that has widened since it began a month ago with U.S. and Israeli attacks on Iran. But he repeated his warning to Iran to open the Strait of Hormuz or risk U.S. attacks on Iranian oil wells and power plants.
Federal Reserve Chair Jerome Powell said the U.S. central bank can wait to see how the Iran war affects the economy and inflation, noting policymakers typically look through shocks such as those from higher oil prices.
Data showed inflation in Germany, the euro zone’s largest economy, gathered pace in March due to surging energy prices. Economists see further increases ahead.
Brent crude futures settled up 0.2% at US$112.78 per barrel, as U.S. crude surged 3.3% to US$102.88.
“We are wrapping up a tricky quarter and an uglier month, and I think people just want to get through this right now and see what the spring will bring,” said Greg Taylor, chief investment officer at PenderFund Capital Management. “There is so much macro uncertainty right now I don’t think anyone has any conviction to make big bets right now either way.”
Madison Cartwright, senior geoeconomics analyst at Commonwealth Bank of Australia, said Iran’s control of the Strait of Hormuz, conduit for about a fifth of the world’s oil and liquefied natural gas, nonetheless gave it little incentive to concede, and the bank expected the war to run until at least June.
On Wall Street, the Dow Jones Industrial Average rose 0.11% to 45,216.14. The S&P 500 fell 0.39% to 6,343.72 and the Nasdaq Composite lost 0.73% to 20,794.64.
The S&P/TSX Composite Index ended down 25.71 points, or 0.1%, at 31,934.94. The index has fallen 7% since the start of March, putting it on track for its first monthly decline in 11 months and its biggest since June 2022.
Technology was the biggest drag on the Toronto market, losing 1.4%. The materials group, which includes metal mining shares, ended 0.3% lower. Energy fell 0.5%.
Among the TSX sectors that notched gains was consumer discretionary. It added 0.9%, while the high-dividend paying utilities sector was up 0.6% as bond yields fell.
The clampdown on the Strait has sent prices for oil, gas, fertiliser, plastic and aluminium surging, along with fuel for planes and shipping. Prices for food, pharmaceuticals and petrochemical products are all set to rise.
Aluminum prices surged to near four-year highs after Iranian airstrikes on two major Middle Eastern producers over the weekend.
Data on U.S. retail sales, manufacturing and payrolls this week will provide an update on how the economy is faring.
The yield on benchmark U.S. 10-year notes fell for the first time in three days, down 9.2 basis points to 4.348%. The 2-year note yield, which typically moves in step with Fed interest rate expectations, fell 8.2 basis points to 3.834%. Canadian bond yields declined by a similar degree, with money markets now pricing in 50 basis points of Bank of Canada rate hikes by the end of this year, down from as much as 75 basis points last week.
Spot gold rose 0.49% to $4,514.34 an ounce, and futures settled 0.7% higher at $4,557.50.
Among Toronto stocks, Air Canada shares lost 2.2%. CEO Michael Rousseau will retire by October, the airline said, after he sparked a backlash for failing to offer condolences in French over a crash that killed two pilots.
Reuters, Globe staff