Key indexes in both Canada and the U.S. jumped at Tuesday’s opening bell after tamer-than-expected U.S. inflation data fuelled optimism that the Federal Reserve may not have to raise interest rates further to contain price pressures.
At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 211.66 points, or 1.07 per cent, at 19920.81.
In the U.S., the Dow Jones Industrial Average rose 243.33 points, or 0.71 per cent, at the open to 34,581.20.
The S&P 500 opened higher by 47.42 points, or 1.07 per cent, at 4,458.97, while the Nasdaq Composite gained 247.63 points, or 1.80 per cent, to 14,015.37 at the opening bell.
Markets got the October U.S. consumer price index ahead of the start of trading, offering the latest glimpse into inflationary pressures in the U.S. economy. Headline inflation in October eased to 3.2 per cent, from 3.7 per cent in September. Economists had been forecasting an October number closer to 3.3 per cent. Core inflation to 4 per cent from 4.1 per cent.
Traders had been awaiting the figures looking for a clearer indication of where the Federal Reserve will go on borrowing costs. The Fed held rates steady at its most recent meeting, but Fed chair Jerome Powell also suggested the central bank could move again if needed to contain inflationary pressures.
“Core CPI came in below expectations with prices lower across the board. This is encouraging for markets and suggests a December hike is off the table,” Damanick Dantes, Portfolio Strategist, Global X, said in a note.
“Consumption should hold up into the holiday season, aided by lower prices at the pump and a downtick in consumer inflation expectations, per the latest Fed survey. For now, positive seasonality and short covering continues to support risk-on conditions, underpinned by the pullback in Treasury yields.”
In Canada, The Globe’s Niall McGee reports this morning that Vancouver-based Teck Resources Ltd. has agreed to sell its coal business to Swiss commodities trading giant Glencore PLC and two Asian steelmakers, in a US$8.9-billion transaction that requires federal approval. Teck has been fielding offers for its core metallurgical coal business since the spring, when an earlier plan to spin it off was cancelled at the eleventh hour because of insufficient shareholder support.
Teck shares were up roughly 2 per cent shortly after the opening bell in Toronto.
In earnings, insurer Sun Life said net income for the third quarter was $871-million or $1.48 a share, up from $111-million or 19 cents in the same period a year ago. Sun Life said the gain came, in part, as a result of higher interest rates. The results were released after Monday’s close of trading. Sun Life shares were higher in morning trading in Toronto.
On Wall Street, retailer Home Depot reported a smaller-than-forecast decline in quarterly same-store sales. Comparable sales at the largest U.S. home improvement retailer fell 3.1 per cent in the third quarter, while analysts on average expected a 3.31-per-cent drop, according to LSEG IBES data. Shares were up more than 1 per cent in premarket.
Overseas, the pan-European STOXX 600 was up 0.96 per cent by afternoon. Britain’s FTSE 100 rose 0.16 per cent. Germany’s DAX and France’s CAC 40 gained 1.3 per cent and 0.88 per cent, respectively.
In Asia, Japan’s Nikkei finished up 0.34 per cent. Hong Kong’s Hang Seng slid 0.17 per cent.
Crude prices were steady, drawing some support from an International Energy Agency forecast predicting improved demand this year and next.
The day range on Brent was US$82.27 to US$82.96 in the early premarket period. The range on West Texas Intermediate was US$78.07 to US$78.71.
“Crude oil prices are consolidating after yesterday’s boost in the wake of the OPEC report which raised their oil demand outlook, noting that Chinese and U.S. demand was not falling to a concerning extent,” Joshua Mahony, chief market analyst with Scope Markets, said.
“Today’s IEA upgrade to their demand forecast for 2024 brings additional fuel to the bullish crude story, although the price of crude has remained stable as the demand upgrade is balanced against the expectation of record supply in 2023 and 2024,” he said in an early note.
Early Tuesday, the IEA, the IEA raised its growth forecast for 2023 to 2.4 million barrels per day from 2.3 million bpd and moving closer to OPEC’s forecast of 2.46 million bpd.
For 2024, the IEA raised its growth forecast to 930,000 bpd from 880,000 bpd, still well below OPEC’s forecast of 2.25 million bpd.
“For now, with demand still exceeding available supplies heading into the Northern Hemisphere winter, market balances will remain vulnerable to heightened economic and geopolitical risks – and further volatility ahead,” the agency said in its monthly forecast.
The forecast comes a day after members of the OPEC+ group upgraded its forecast for this year and held to its previous projections for 2024. The group also blamed speculators for recent volatility in crude prices.
In other commodities, gold prices traded in a narrow range.
Spot gold was flat at US$1,945.40 per ounce by early Tuesday morning, after hitting its lowest in more than three weeks on Monday. U.S. gold futures were also steady at US$1,949.50.
The Canadian dollar turned higher while its U.S. counterpart lost altitude after the latest U.S. inflation figures.
The day range on the loonie was 72.22 US cents to 72.70 US cents in the early premarket period. The loonie was near the upper end of that spread just after the U.S. inflation report.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was down 0.71 per cent at 104.87 after new figures showed easing inflationary pressures in October.
Elsewhere, Britain’s pound was at US$1.2296 up 0.15 per cent earlier in the morning and the euro was at US$1.0711, up 0.1 per cent, according to figures from Reuters.
In bonds, the yield on the U.S. 10-year note was lower at 4.618 per cent in the predawn period.
More company news
CAE Inc. reported its second-quarter profit and revenue rose compared with a year ago. The flight simulator company says it earned net income attributable to equity holders of $58.4-million or 18 cents per share for the quarter ended Sept. 30. The result compared with a profit of $44.5-million or 14 cents per diluted share in the same quarter last year. Revenue for the three-month period totalled $1.09-billion, up from $993.2-million.
Aimia Inc. reported a loss in its latest quarter compared with a profit a year ago when its results were boosted by the sale of its stake in the PLM loyalty program. The investment holding company says its net loss attributable to equity holders amounted to $27.8-million or 37 cents per diluted share for the quarter ended Sept. 30. The result compared with a profit of $517.5-million or $5.89 per diluted share a year ago, when the company recorded a one-time gain of $530.6-million. Revenue totalled $114.3-million, up from $300,000 in the same quarter last year. -The Canadian Press
Chrysler-parent Stellantis said it is offering 6,400 U.S. salaried employees voluntary buyouts as it works to cut costs amid the transition to electric vehicles and agreeing to a new United Auto Workers contract. The buyouts would be about half the company’s salaried U.S. employees not represented by a union, which is currently 12,700. Another 2,500 Stellantis U.S. salaried workers are unionized and are not being offered the current buyout. -Reuters
U.S. consumer price index for October (8:30 a.m. ET)
Fed Vice Chair for Supervision Michael Barr testifies to Senate panel (10 a.m. ET)
With Reuters and The Canadian Press