Futures linked to Canada’s primary stock index were firmer on Friday morning, driven in part by reports that the United States and Iran may have agreed to extend a ceasefire that would also permit unimpeded vessel passage through the Strait of Hormuz.
Investors were also digesting fresh Canadian economic data indicating that growth effectively stalled in the first quarter, with annualized real gross domestic product printing marginally negative. That backdrop has helped cement market pricing that assigns roughly a 97% probability that the Bank of Canada will maintain its policy rate at the upcoming June meeting, as the central bank weighs how to keep the economy on an even keel amid geopolitical and other headwinds.
By 08:09 ET (12:09 GMT), the S&P/TSX 60 index standard futures contract was up 5 points, or 0.3%.
On Thursday, the broader S&P/TSX composite index closed slightly higher, adding 0.15% to finish at 34,463.92.
U.S. futures and risk sentiment
U.S. equity futures were also firmer on Friday, supported by the ceasefire reports. At 08:21 ET, Dow futures were higher by 0.3%, S&P 500 futures gained 0.1%, and Nasdaq 100 futures climbed 0.1%.
Analysts at Vital Knowledge cautioned that the situation contained numerous variables. In a note they said: "[T]here are a lot of moving pieces this morning, and it’s all netting out to approximately neutral for the SPX. On Iran, we haven’t seen anything all that incremental since the initial Axios article Thursday morning about a deal being in place and awaiting Trump’s final approval, and that Axios report was very consistent with the flurry of articles/comments from the weekend," underscoring that the market response so far was measured rather than decisive.
The benchmark S&P 500 and the tech-heavy Nasdaq Composite had both finished at fresh record highs for a second consecutive session on Thursday, reflecting improved investor sentiment after reports suggested a draft agreement to extend the ceasefire by 60 days and ease concerns about prolonged disruption of oil flows through the Strait of Hormuz. The proposed framework, however, still requires approval from U.S. President Donald Trump, and Iranian media indicated the outline had not been finalized.
Energy and inflation dynamics
Brent crude futures, the global oil benchmark, were last trading down 1.4% at $91.40 a barrel, while U.S. West Texas Intermediate futures fell 1.2% to $87.81 a barrel. Oil futures were on track for what would be their steepest weekly decline since early April, even as Brent had only recently been floating above $100 a barrel and remained well above pre-conflict levels. Market participants have continued to worry that a spike in energy costs could translate into broader inflation pressures globally.
Separately, the Federal Reserve’s preferred inflation gauge released on Thursday showed prices rose more slowly than expected in April. Still, there were signs that household spending power was being squeezed, as consumers scaled back purchases to offset increases in energy costs. Several Federal Reserve officials - Neel Kashkari, Mary Daly and Anna Paulson - were scheduled to speak on Friday, with markets attuned to any comments that might shed light on future interest-rate guidance.
Precious metals
Gold moved higher on easing inflation concerns. By 08:49 ET, spot gold had climbed 0.4% to $4,515.79 an ounce, while gold futures were up 0.3% at $4,546.40 an ounce. The metal had fallen to a two-month low in the prior session but recovered to close 0.8% higher after reports that the U.S. and Iran planned to resume negotiations. Typically, geopolitical tensions and military conflicts can lift demand for safe-haven assets like gold, although those dynamics are counterbalanced at times by concerns that elevated rates could weigh on non-yielding assets.
What this means for markets
Early trading on Friday reflected a market balancing act: improving risk appetite tied to a potential ceasefire extension versus persistent vigilance over the durability of economic momentum at home and abroad. In Canada, the Q1 GDP outcome and a near-lock among traders that the central bank will pause in June are influential inputs for both equity and bond markets, while developments in the Middle East continue to drive energy and safe-haven flows.
Investors will be watching subsequent comments from central bank officials, further details on any formal agreement between the U.S. and Iran, and follow-through in oil and precious-metals markets to assess whether the early-morning moves evolve into a broader market trend.