Futures tied to Canada’s principal equity gauge moved slightly lower on Thursday as traders weighed the implications of a fresh round of U.S.-Iran hostilities alongside corporate earnings and U.S. inflation data.
By 08:08 ET (12:08 GMT), the S&P/TSX 60 index standard futures contract had declined by 5 points, or roughly 0.2%.
Results from several of the country’s largest banks were on investors’ radar. Royal Bank of Canada reported a rise in second-quarter profit, with the lender’s trading business benefiting from market volatility. TD Bank said elevated interest income contributed to a jump in adjusted income for the second quarter.
U.S. futures and market context
Across the border, U.S. stock futures were pointing lower, though the major U.S. averages had ended the previous session modestly higher. Analysts at Vital Knowledge noted that hopes persisted for a negotiated end to the conflict with Iran, even as the White House described a draft memorandum of understanding shown by Iranian state TV as a "complete fabrication."
Market players pointed to several factors behind recent moves: a retreat in Brent crude futures earlier in the week, some solid corporate reports - notably from Abercrombie & Fitch and Bath & Body Works - and upbeat, or "sanguine," commentary from companies at a closely watched conference. Those elements helped catalyze gains in consumer discretionary names, according to the Vital Knowledge analysts.
At the same time, energy-linked stocks experienced pressure and investors took profits in some tech names that had seen strong runs. "Investors are biding their time regarding the Middle East and, despite the resurgence of attacks, continue to hope for a constructive outcome to negotiations between the U.S. and Iran. However, this is causing trading volume to thin out and price volatility to decline," said Andreas Lipkow, Chief Market Analyst at CMC Markets.
Fresh air strikes and military developments
Tensions flared after U.S. forces struck targets near the Iranian port city of Bandar Abbas earlier in the day, prompting retaliatory actions that media reports attributed to Iran’s Islamic Revolutionary Guard Corp (IRGC). The IRGC said it had struck a U.S. military base in Kuwait in retaliation for the Bandar Abbas strikes. Kuwaiti authorities reported they were defending against drone and missile attacks.
Separately, Reuters reported that the U.S. military shot down four Iranian attack drones and struck a ground control station in Bandar Abbas. These incidents marked what market observers described as a potential resumption of open hostilities between the U.S. and Iran, after Tehran had warned of reprisals following U.S. strikes earlier in the week.
The U.S. military characterized its actions as being in "self defense," and maintained that a ceasefire with Iran remained in place. The new strikes followed remarks by U.S. President Donald Trump rejecting reports that Iran and Oman would be managing shipping through the Strait of Hormuz under a deal to end the war. Trump also signaled that Iran wanted to reach a deal, but that he was not yet satisfied with the terms.
Inflation gauge and market implications
Inflation readings that are closely watched by the Federal Reserve were mixed. The core personal consumption expenditures (PCE) price index, which excludes food and energy, rose 3.3% on a year-on-year basis in April, matching expectations and ticking above March’s 3.2% reading. On a month-on-month basis the core PCE rose 0.2% in April, compared with the prior monthly reading of 0.3% in March.
Headline PCE increased 3.8% year-on-year in April, in line with forecasts and higher than March’s 3.5%. Month-on-month, the headline index decelerated to 0.4% from 0.7%, a slower pace than expectations.
Energy markets showed mixed signals in the piece of reporting: an earlier fall in Brent futures helped lift consumer discretionary stocks, but oil prices were also described as having climbed, renewing worries that a wave of energy-related inflation could persuade central banks to keep interest rates higher for longer. That dynamic is generally unfavorable for gold, a non-yielding asset, and gold prices were reported to have fallen.
Equities and sector moves
Optimism around artificial intelligence and solid quarterly results helped push all three major U.S. indices to record closing highs on Wednesday. The S&P 500 was on track for a ninth-straight weekly gain, a streak that, if completed, would be its longest since 2023.
On the corporate front, HP shares slipped in premarket trade after the company warned that margins would be pressured by higher memory-chip costs. Marvell Technology fell following its first-quarter results. Conversely, companies tied to drone capabilities drew investor interest: names such as Unusual Machines and AeroVironment rallied after a Wall Street Journal report that the administration was in talks about potential funding for drone-related firms.
What this means for markets
- Canadian equity futures opened lower as geopolitical uncertainty and bank earnings shaped the tone.
- U.S. futures were softer despite prior gains in the main averages, with investors parsing both geopolitical headlines and inflation data.
- Sectors affected included energy - which has seen mixed price signals - consumer discretionary (benefitting from some earnings beats), technology (profit-taking in recent winners), banks (boosted by higher interest income for some lenders), and defense or drone-related manufacturers (which saw rallies).
Bottom line
Markets entered Thursday with a cautious tone. Fresh exchanges of strikes between the U.S. and Iran have reintroduced an element of geopolitical risk that is depressing trading volumes and keeping investors watchful. At the same time, quarterly bank results and U.S. inflation readings provided concrete data points that helped to shape positioning across sectors. How oil and inflation evolve in the near term will likely be an important determinant of interest-rate expectations and asset performance.