Futures tied to Canada’s leading equity index traded modestly lower on Friday as investors reassessed the implications of unexpectedly strong U.S. employment figures and fresh developments in the Middle East.
By 08:52 ET (12:52 GMT), the S&P/TSX 60 index standard futures contract was down 12 points, or about 0.6%. The prior session had seen the Toronto Stock Exchange’s S&P/TSX composite index slip 0.8%, closing at 35,111.81 points.
U.S. futures and recent session moves
Across the border, U.S. equity futures showed mixed direction. At 08:48 ET, Dow futures were up roughly 0.2%, S&P 500 futures were down about 0.5% and Nasdaq 100 futures had eased 1.1%.
In the prior cash session, the Nasdaq Composite dipped around 0.1% after an earnings update from chipmaker Broadcom came in below some high expectations, pressuring peers such as Micron, Intel and Advanced Micro Devices. Meanwhile, the Dow Jones Industrial Average and the S&P 500 advanced, climbing 1.7% and 0.4% respectively, as some market participants continued to entertain the possibility of a negotiated détente between the United States and Iran.
Employment report drives attention
Markets were chiefly focused on the monthly U.S. employment report. May’s nonfarm payrolls rose by 172,000, considerably above consensus forecasts of 85,000. The report showed job gains concentrated in sectors including leisure and hospitality, local government and health care, while employment in financial activities recorded a decline.
The unemployment rate held steady at 4.3%, matching April’s reading and economists’ expectations. Average hourly earnings increased by 0.3% month-on-month, in line with estimates and up from a 0.2% rise in April.
April’s payrolls tally was revised sharply higher to 179,000 from an initial estimate of 115,000, and March’s figure was also adjusted upward to 214,000 from 185,000. Taken together, employment for those two months was 93,000 roles higher than previously reported, according to the Labor Department’s Bureau of Labor Statistics.
Analysts noted that the labor market’s resilience comes despite the economic headwinds stemming from the conflict in Iran and related disruptions to oil flows. Some market participants have grown more inclined to price in at least one Federal Reserve rate increase by the end of 2026. Still, a research note from Vital Knowledge cautioned that because the unemployment rate and wage growth "weren’t particularly hot," the policy outlook "probably won’t shift that dramatically."
GOVERNMENT BONDS
U.S. government bond yields climbed following the stronger employment print. The 2-year Treasury yield, which is particularly sensitive to shifts in near-term rate expectations, rose by 6.5 basis points to 4.115%. The 10-year Treasury yield increased by 5.3 basis points to 4.53%; late on Thursday the 10-year had been around 4.477%.
Canadian government bond yields rose in parallel, with the comparable yield moving up by 7.1 basis points to about 2.07%.
OIL: Slight pullback but weekly gains intact
Oil prices retreated modestly after reports said operations had resumed at Oman’s Mina al Fahal port following an earlier disruption that halted some loadings. The event was attributed in reports to an explosion between single-buoy mooring 1 and 2, with claims that a drone strike may have been involved; several supertankers were reported at anchor off the port in the wake of the incident.
By 09:05 ET, Brent crude futures for August were down nearly 0.7% at $94.40 a barrel, while U.S. West Texas Intermediate crude futures slipped about 0.9% to $92.18 a barrel. Despite the intraday declines, both contracts were positioned to record their first weekly gain in three weeks as persistent Middle East tensions kept supply risk premium elevated and complicated expectations for a rapid resolution to regional hostilities.
Market attention has centered on the prospect of reopening the Strait of Hormuz, a key maritime chokepoint for global oil flows. That waterway has effectively been closed to tanker traffic since late February alongside the spread of the Iran-related conflict, raising concerns about disruption to roughly a fifth of the world’s crude shipments.
GEOPOLITICS: Renewed fighting in Lebanon
Diplomatic hopes for a broader peace accord that might undercut oil-market risk were dealt a setback when Iran-backed Hezbollah rejected a proposed ceasefire with Israel and said it would not withdraw forces from the country, while also criticizing Lebanon-Israel negotiations. Israel continued air strikes in southern Lebanon and faced retaliatory fire from Hezbollah. Israeli officials indicated their forces would not be withdrawing from the area or halting operations following a brief pause earlier in the week.
Those developments have complicated prospects for any comprehensive U.S.-Iran diplomatic package, particularly given Tehran’s stated insistence that a cessation of hostilities in Lebanon is central to any lasting settlement.
GOLD: Retreat amid higher yields and stronger dollar
Gold prices edged lower as investors priced in the implications of a higher-for-longer interest rate environment and as geopolitical developments unfolded. Spot gold had fallen about 1.3% to $4,416.68 an ounce by 09:17 ET, while gold futures were down roughly 1.4% at $4,442.20 an ounce. Over the past week, spot gold had retreated about 2.7%.
Analysts note that an elevated rate backdrop tends to weigh on a non-yielding asset such as gold, while a firmer U.S. dollar makes bullion more expensive for holders of other currencies. Even though gold is commonly viewed as a safe-haven asset during geopolitical strain, it has weakened materially over the last three months, falling by approximately 13% in that period.
IMPLICATIONS FOR MARKETS
- Equities - Canadian equity futures moved lower amid cross-border market sensitivity to U.S. macro data and global risk factors.
- Fixed income - Stronger-than-expected payrolls pushed yields higher, tightening conditions for rate-sensitive sectors and assets.
- Commodities - Oil remained elevated on weekly measures despite a near-term pullback; gold declined as yields and the dollar firmed.
Investors entering the next sessions will be watching additional economic releases and any diplomatic signals from parties involved in the Middle East conflict for clues about how central bank pricing and commodity risk premia might evolve.