Canada’s main stock index rose on Tuesday to its highest closing level in one week as higher oil prices boosted energy shares and data showing slower U.S. inflation bolstered risk appetite ahead of a Federal Reserve interest rate decision.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 69.09 points, or 0.35%, at 19,990.40, its highest closing level since last Tuesday.
“The major reason for the rally is slowing inflation in the U.S.,” said Lorne Steinberg, president, Lorne Steinberg Wealth Management Inc.
“Despite the fact that the Bank of Canada raised rates last week, anything that leads investors to hope that we are very close to the end of this rate rising cycle is the most bullish thing in the world.”
The energy sector rose 1.1% as the price of oil settled 3.4% higher at $69.42 a barrel. The move up in oil came as China’s central bank moved to stimulate the local economy.
Heavily-weighted financials rose 0.9% even as Canada’s financial regulator said in a statement to Reuters that it is urging lenders to tackle risks from mortgage extensions at the “earliest opportunity.”
Among the stocks posting strong gains was Teck Resources Ltd . Its shares advanced 2.6% as Nippon Steel said it remains interested in investing in the company’s steelmaking coal assets.
The S&P 500 and Nasdaq reached their highest closes in 14 months on Tuesday after data showed consumer prices rose modestly in May, boosting bets that the Federal Reserve will not raise interest rates at the end of its policy meeting on Wednesday.
Stocks advanced after a U.S. Labor Department report showed the consumer price index (CPI) rose 0.1% last month following a 0.4% jump in April, with core inflation unchanged at 0.4%.
On a year-on-year basis, headline inflation increased by a less-than-estimated 4.0%, reflecting declines in the cost of energy products and services, including gasoline and electricity.
“If the Fed was looking for data to point to say, ‘We’re going to pause in June,’ I think they got it today,” said Liz Young, head of investment strategy at SoFi in New York.
“But it’s another one of those that you can cut whichever way you want to make your case. If you want to be bullish, you say inflation is down more than 50% since its peak. If you want to bearish, you can say inflation is still more than twice the Fed’s target,” Young said.
Traders have priced in a 93% chance that the U.S. central bank will hold interest rates at the 5%-5.25% range on Wednesday, and 62% odds of 25-basis-point hike in July, according to the CME Fedwatch tool.
The benchmark S&P 500 has recovered about 22% from its October 2022 closing low, fueled in large part by gains in market heavyweights such as Apple Inc, Nvidia Corp and Tesla Inc. More recently, sectors such as energy and materials have climbed, as well as small-cap stocks.
U.S.-listed shares of Chinese companies climbed after China’s central bank lowered its short-term lending rate for the first time in 10 months.
Advanced Micro Devices Inc dropped after an update on the chipmaker’s artificial intelligence strategy failed to impress investors.
Unofficially, the S&P 500 climbed 0.69% to end the session at 4,369.06 points.
The Nasdaq gained 0.83% to 13,573.32 points, while Dow Jones Industrial Average rose 0.43% to 34,212.25 points.
Intel Corp gained after a report the chipmaker is in talks with SoftBank Group Corp’s Arm to be an anchor investor in its initial public offering.
Bunge Ltd rallied after the U.S. grains merchant and Glencore-backed Viterra said they were merging to create an agricultural trading giant worth about $34 billion, including debt.
Reuters