Everything You Need to Know on Tuesday: Canada's Inflation Cools More Than Expected Before Key Rate Decision

Good morning mooers! Here are things you need to know about today's market:

● S&P/TSX 60 Index Standard Futures are trading at 1,362.80, up 0.07%

● 'Exactly what BoC is looking for': Economist on business outlook survey

● Canada's inflation drops to 2.7%, surpassing expectations before key rate decision

● Natural gas demand grows but faces uncertain future, IEA reports

● Shopify rallies after BofA elevates Shopify to Buy with an $82 target

● Barrick up in U.S. pre-market on higher Q2 gold, copper production QoQ

Today, the Canadian dollar is trading at 73.27 cents US, a slight decrease from previous close.

S&P/TSX 60 Index Standard Futures are trading at 1,362.80, up 0.07% from previous.

Canada's inflation rate fell slightly more than anticipated to 2.7% in June, primarily due to a decrease in gas price growth. Core inflation also edged down slightly, according to data released Tuesday, just ahead of next week's central bank interest rate decision.

Analysts had predicted a decrease to 2.8% from May's 2.9%. The consumer price index declined by 0.1% month-over-month, marking the first monthly slowdown since December.

The inflation figure was below the Bank of Canada's 2.9% forecast for mid-2024. The bank projects inflation will drop below 2.5% in late 2024 and hit the 2% target by 2025.

With new forecasts due on July 24 when the rate decision is announced, the market anticipates about an 80% chance of another rate cut, following last month's 25 basis point reduction.

Two key inflation measures, the CPI-median and CPI-trim, averaged a slight decrease to 2.75% in June. The slowdown was mainly due to gas prices, which only increased by 0.4% year-over-year in June, a significant drop from May's 5.6% hike. Excluding gas, the CPI rose 2.8% annually.

While food prices and cellular services moderated the inflation cooldown, excluding food and energy, the increase was stable at 2.9%. Service prices went up by 4.8% annually, and goods inflation slowed down to 0.3%.

Following the Bank of Canada's recent business outlook survey, economist David Doyle of Macquarie Group confirms that the economic indicators are consistent with expectations, potentially setting the stage for interest rate reductions. The survey indicates that inflation expectations are muted, reinforcing the central bank's criteria for future rate cuts.

Doyle suggested in an interview with BNN Bloomberg that the survey data supports a potential 25 basis point rate cut by the Bank of Canada. He noted that the survey, mainly reflecting May's conditions, doesn't account for the early June rate cut's effects but is generally trending toward slower growth and rising unemployment rates, as anticipated.

He linked the slowdown in firms' input and selling prices to factors involving unionized and public sector workers, which might explain some wage growth discrepancies. With the unemployment rate currently at 6.4 percent and an increasing output gap, Doyle sees the conditions as conducive to the decreased inflationary pressures that the Bank of Canada seeks.

The International Energy Agency's latest Gas Market Report highlights a robust first-half growth in natural gas demand, with a 3% increase over the previous year, surpassing the decade's 2% average. Asia, particularly China and India, is driving this growth as industries ramp up usage.

Despite these gains, the IEA cautions that the demand outlook is uncertain due to underwhelming global liquefied natural gas (LNG) production and geopolitical tensions causing price fluctuations. Second-quarter prices rose due to tighter supplies.

The agency forecasts a 2.4% rise in natural gas demand for the year, with Asia's rapid market expansion being the primary contributor.

LNG supply is expected to improve in the latter half of the year as new projects commence, especially from the U.S. Nonetheless, geopolitical instability, such as disruptions in the Red Sea and attacks on Ukraine's energy infrastructure, poses significant risks.

The IEA underscores the importance of security in natural gas supply and calls for enhanced international cooperation to explore flexibility in gas and LNG logistics.

Bank of America highlights Shopify's potential to further dominate the small business sector in the U.S., which consists of 5.2 million businesses, bolstered by the company's increasing brand recognition and several strong competitive edges. The firm anticipates that Shopify's continued rollout of merchant solutions like the Shopify app, Audiences, Capital, and POS will enhance gross merchandise value (GMV) monetization and improve operating margins, noting that Shopify's stock currently trades at a value comparable to other large software companies on an enterprise value/sales basis.

Reacting to the upgrade, Shopify's stock rose 3.55% in premarket trading on Tuesday. The company is scheduled to announce its second-quarter earnings on July 26. Despite the positive upgrade, it is noted that the majority of recent earnings per share (EPS) revisions from analysts have been downward adjustments.

The miner produced 948,000 ounces of gold and 43,000 tonnes of copper, increasing quarter over quarter from 940,000 ounces of gold and 40,000 tonnes of copper.

Second-quarter sales totaled 956,000 ounces of gold and 42,000 tonnes of copper, rising from first-quarter sales 910,000 ounces of gold and 39,000 tonnes of copper.

Barrick expects its gold and copper production in 2024 to progressively increase each quarter through the year, with a higher weighting in the second half.

The company said it remains on track to achieve its full year 2024 gold and copper guidance.

Barrick's share price was trading 0.22% higher at last look to US$18.40 on the NYSE after dropping 0.51% to $25.12 yesterday on the TSX.