Negative Start for Futures on Fed Independence Fears

Futures tracking Canada's main stock index fell on Tuesday as investors assessed earnings releases from top domestic banks, while concerns over the U.S. Federal Reserve's independence sparked risk aversion.

The TSX Composite Index slid 163.19 points to close Monday’s session at 28,169.94

Futures were 0.3% to the bad Tuesday.

The Canadian dollar eked up 0.04 cents U.S.

Bank of Montreal a rise in third-quarter profit, helped by higher income from interest and as it set aside less in provisions for potential loan losses.

Bank of Nova Scotia also posted a rise in quarterly profit on the back of higher interest earnings.

The earnings are reflective of seemingly easing trade tensions, with banks having realized that the implications of U.S. tariffs on loan portfolios would be less than feared.

Prime Minister Mark Carney last week announced plans to remove some retaliatory import tariffs on U.S. goods and intensify talks with President Donald Trump on striking a new trade deal.

Meanwhile, global risk sentiment worsened after Trump announced he was dismissing Fed Governor Lisa Cook over alleged improprieties in obtaining mortgage loans, marking another move to jeopardize the central bank's independence.

ON BAYSTREET

The TSX Venture Exchange gave back 0.54 points Monday to 803.07.

ON WALLSTREET

U.S. stock futures were lower Tuesday, adding to a slide in the major averages to start the week, after President Donald Trump removed Federal Reserve Governor Lisa Cook from the board of the central bank.

Futures for the Dow Jones Industrials retreated 62 points, or 0.1%, to 45,288.

Futures for the broader index fell 3.25 points to 6,452.25

Futures for the NASDAQ lost five points to 23,493.25

In Japan, the Nikkei 225 dipped 1% Tuesday, while in Hong Kong, the Hang Seng fell 1.2%.

Trump’s unprecedented move adds to the pressure the president has been putting on the central bank’s independence. By law, a president may only remove Fed governor “for cause.” As a result, it is possible the matter will be challenged in the courts.

There are currently six members on the Fed’s board, with one seat vacant after the resignation of Adriana Kugler earlier this month. Removing Cook would leave five members, with non-Trump appointees still holding a majority. However, if Stephen Miran is cleared for the Kugler vacancy and the president is successful in removing Cook, it would give Trump a 4-3 majority.

If Fed Chair Jerome Powell leaves his seat voluntarily after his term expires in May, it would give the president a fifth vote.

Investors already appeared hopeful about the prospect of lower interest rates coming in September, as hinted at by Powell last week in Jackson Hole, Wyoming. They’re also looking ahead to Nvidia’s earnings report on Wednesday, which could bolster the megacap tech trade following its recent slide. The “Magnificent Seven” stocks rallied Friday, but only after five straight days of losses.

A raft of economic reports is due out Tuesday morning. Investors will parse through releases on the latest durable goods orders and consumer confidence. The Case-Shiller Home Price Index is due out, as is the Richmond Fed Manufacturing Index.

Oil prices surrendered $1.21 to $63.59 U.S. a barrel.

Gold prices nicked up 80 cents at $3,418.30 U.S. per ounce.