TSX drops to one-week low ahead of US data, Fed policy decision
Updated at 0946 ET
By Sruthi Shankar and Nikhil Sharma
June 11 (Reuters) -Canada's main stock index fell to a one-week low on Tuesday, dragged down by commodity-linked shares, as investors awaited key U.S. inflation data and the Federal Reserve's monetary policy decision later this week.
The Toronto Stock Exchange's S&P/TSX Composite index .GSPTSE fell 0.9% to 21,869.03 points, its lowest level since June 4.
The materials index .GSPTTMT, which includes base and precious metal miners as well as fertilizer companies, fell 1.7% to lead sectoral losses, as spot silver prices XAG= tumbled nearly 2%.
Both gold miners .SPTTGD and energy indexes .SPTTEN dropped about 1.3% each, as spot gold XAU= and oil prices CLc1, LCOc1 came under pressure. GOL/
Investors are keeping a close eye on the economic projections of Fed policymakers on Wednesday, which is expected to show fewer rate cuts than they anticipated three months ago amid unexpectedly sturdy U.S. inflation.
"It looks like the Fed is probably going to take more of a hawkish tone. Therefore, we're looking for maybe at most one rate cut towards the end of the year," said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth.
"That is not good for things such as commodities or gold or oil."
Traders expect the Fed to hold rates in the upcoming meeting, but are pricing in rate cuts of 40 basis points (bps) this year, with the first cut likely in September or November, according to LSEG's rate probabilities app.
After the Bank of Canada trimmed its key policy rate last week, investors expect at least two more rate cuts this year.
"The BoC may be able to cut interest rates a few times, but I don't think they're going to be able to cut a lot if the U.S. does not start to cut themselves," Small said.
BoC Governor Tiff Macklem and Deputy Governor Sharon Kozicki are scheduled to speak later this week.
In corporate news, e-commerce platform Shopify SHOP.TO rose 1% after J.P. Morgan started coverage with an "overweight" rating.
Enghouse Systems ENGH.TO climbed 3.4% after the software firm posted second-quarter results.
Reporting by Sruthi Shankar in Bengaluru; Editing by Shreya Biswas
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