TSX Futures Edge Lower on Tech Sector Jitters and Rising Oil Prices

Futures contracts tied to Canada's main stock index edged lower in early trading Friday, tracking weakness in U.S. markets as concerns grow over the sustainability of the artificial intelligence-driven rally and a spike in oil prices renewed inflation fears.

By 07:13 ET, S&P/TSX 60 index futures were down 5 points, or approximately 0.3%. The move signaled a potentially negative open after the benchmark S&P/TSX composite index finished Thursday's session 0.2% lower, weighed down by mining shares.

Global Equities Under Pressure

The negative sentiment was more pronounced in the United States, where futures pointed to a second day of declines. S&P 500 futures fell 0.9%, while futures for the tech-heavy Nasdaq 100 slid 1.7%.

Analysts attributed the broad market weakness to a cooling of enthusiasm for the AI sector. According to a note from Vital Knowledge, the market narrative around AI is "deteriorating." This sentiment was amplified after Netflix (NASDAQ:NFLX) issued a disappointing revenue and profit forecast, overshadowing its strong quarterly earnings and adding to investor questions about lofty tech valuations.

Geopolitical Tensions Fuel Oil Surge

Adding to market headwinds, escalating conflict in the Middle East has pushed crude oil prices sharply higher, stoking concerns about a resurgence in inflation. The U.S. and Iran exchanged military strikes, increasing the geopolitical risk premium for crude supplies.

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As of early Friday morning:

• West Texas Intermediate (WTI) crude futures gained 2.3% to trade above $80 per barrel.
• Brent crude, the global benchmark, rose 2.0% to near $86 per barrel.

Both benchmarks were on track for weekly gains of more than 10%, according to the source. The rise in energy costs poses a challenge for central banks, including the Bank of Canada and the U.S. Federal Reserve, which have been working to bring inflation back to target.

Impact on Commodities and Rates

The prospect of renewed inflation has reinforced expectations that central banks will keep interest rates higher for longer. Recent comments from Federal Reserve officials have emphasized that inflation remains too high to consider easing monetary policy.

This outlook weighed on gold prices. While spot gold edged higher Friday, it was on pace for its largest weekly decline in six weeks, down over 3% during that period. Higher interest rates tend to diminish the appeal of non-yielding assets like gold.