Futures tied to Canada’s S&P/TSX Composite Index climbed on Tuesday, supported by a tempering of expectations for aggressive U.S. Federal Reserve rate hikes and geopolitical risks in the Strait of Hormuz.
Market sentiment improved after recent comments from Federal Reserve officials suggested a more cautious approach to monetary tightening, reducing the likelihood of large rate increases in the near term. Traders also priced in a reduced probability of a 50-basis-point hike at the Fed’s next policy meeting, which had been a key downside risk for equities.
The easing of rate hike bets coincided with heightened concerns over oil supply disruptions in the Strait of Hormuz, a critical chokepoint for global crude shipments. Analysts noted that while the risk of a direct supply shock remained low, the mere possibility of disruptions was providing support to oil-linked sectors in the TSX, particularly energy stocks.
Energy shares, a dominant component of the TSX, were among the primary beneficiaries of the dual tailwinds. Suncor Energy and Canadian Natural Resources were indicated higher in premarket trading, reflecting the sector’s sensitivity to both geopolitical developments and broader commodity price movements.
The TSX’s advance mirrored gains in U.S. equity index futures, which also benefited from the shift in Fed policy expectations. However, analysts cautioned that the market’s upward momentum could be tempered by ongoing concerns over inflation and the potential for further monetary tightening if price pressures fail to subside.
The TSX futures contract expiring in June was last up 0.2%, while the broader index’s spot-level performance is expected to follow a similar trajectory when trading resumes at 9:30 a.m. ET.
