TSX Futures Edge Higher as Falling Oil Prices Temper Inflation Concerns

Futures for Canada's main stock index edged higher Friday morning as a continued decline in crude oil prices helped alleviate investor concerns about inflation. The move follows a strong rebound in the previous session for the Toronto Stock Exchange.

Market Snapshot

By 06:48 ET, the S&P/TSX 60 index standard futures contract had risen by 3 points, or 0.1%, according to data from Investing.com. This builds on Thursday's momentum, when the benchmark S&P/TSX composite index surged 1.1% in its largest single-day advance since September 3, recovering from a nearly seven-week low set on Wednesday.

Sentiment was also cautiously optimistic in the U.S., where futures for the S&P 500 and Nasdaq 100 also posted modest gains ahead of the New York open.

Oil Prices Drive Sentiment

The primary driver for markets was a third consecutive session of falling oil prices. Worries that elevated crude costs would fuel persistent inflation have been a key concern for investors, as this could pressure central banks to maintain aggressive monetary tightening.

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The recent price drop comes amid hopes that Saudi Arabia could soon restore some of its disrupted supply. According to a Bloomberg News report, the country is aiming to bring about half of the capacity of a key damaged pipeline back online within days, rather than weeks as previously feared.

However, the supply outlook remains uncertain due to significant geopolitical risks in the Middle East. These include ongoing conflicts involving Saudi Arabia and Iran-backed Houthi rebels and reports of an Iranian strike on a tanker in the Strait of Hormuz.

Global Rate Hikes and Commodities

The focus on inflation comes as central banks globally continue to tighten policy. On Friday, the Bank of Japan raised interest rates to a 31-year high, following a hawkish decision from the U.S. Federal Reserve earlier in the week. Analysts at Deutsche Bank noted that these moves suggest "we’re in a globally synchronised cycle of rate hikes again."

In other commodities, spot gold prices rose and were on pace for a weekly gain of about 0.9%. The non-yielding metal benefited from the pullback in oil prices, which has slightly tempered the U.S. dollar's recent strength following the Fed's rate hike.