Will recent oil developments shape BoC decision?

Prab Sagoo, associate director at Nasdaq Advisory Services, explains in his weekly commentary how financial and energy markets are in for a rough ride this week.

Highlights

• Volatility, nervousness and bearish sentiment continue to grow in the equity markets, with the TSX continuing to rack up losses for the year. It was down over 7% year-to-date at the end of last week (Read: Panicked clients? Here’s help).
• The price of oil continues to worry the market, breaking below the psychologically key $30 per share level. Now, as more of Iran’s oil is set to hit the markets following an easing of sanctions, another increase in supply will only further weaken the commodities near-term outlook (Read: Further dip in oil could benefit investors).
• As a result, weak oil prices will continue to weigh on the TSX, with both energy and financial stocks likely to struggle in this environment.
• Domestically, this week is all about the Bank of Canada meeting. Markets are once again unsure of whether we will see another rate cut by a bank that has already cut twice in the last year. However, analyst expectations of a cut have climbed notably following the dim Business Outlook Survey released last week (Read: Business sentiment deteriorating across Canada: BoC).
• Further, the sharpening decline in oil prices has added to stressors on the domestic front, while the Canadian dollar continues to weaken in expectation of another cut. The key question is, how much of a stimulative impact does the BoC think another rate cut will have on the economy? (Read: Op-Ed: Why another rate cut will fail)

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.