Canada’s main stock index touched the highest level in nearly eight weeks as softer-than-anticipated U.S. inflation data bolstered expectations that the Federal Reserve is done hiking interest rates, while a surge in commodity prices lifted energy and material stocks.
The Toronto Stock Exchange’s S&P/TSX composite index was up 265.53 points, or 1.35%, at 19,974.68, on track for a four-day winning streak.
The Canadian dollar also strengthened against the greenback, while the government’s 10-year bond yields slipped.
U.S. consumer prices were unchanged in October on the back of lower gasoline prices and underlying inflation slowing, bolstering the view that the U.S. central bank was probably done raising interest rates.
“The drop in inflation suggests that recent monetary policy has been doing its job,” said Richard Flynn, Managing Director at Charles Schwab UK, in a note.
“All in all, “higher for longer” (interest rate) looks like a much more sensible move than “even higher”.”
Traders see no more rate increases and have been adding to bets on rate cuts starting May 2024.
The sentiment spurred a rise in rate-sensitive stocks, with top gainer real estate index adding 3.0%, financials up 1.5%, and the information technology stocks gaining 1.7%.
Materials sector, which includes precious and base metals miners and fertilizer companies, advanced 2.8% as prices of both gold and copper rose following the favorable inflation print from the U.S.
A 2.8% rise in shares of Teck Resources also supported the materials index after a Glencore-led consortium agreed to acquire the Canadian miner’s steel-making coal unit for $9 billion.
The energy sector climbed 0.4% as oil prices rose after the International Energy Agency (IEA) raised its demand growth forecasts.
Sun Life Financial also moved 1.5% higher after the insurer reported better-than-expected quarterly profits, helped by growth at its wealth and asset management unit and higher fees.
Wall Street’s main stock indexes climbed on Tuesday as cooler-than-expected inflation data boosted expectations that the Federal Reserve was done raising interest rates and could start cutting them next year.
Both the S&P 500 and the tech-heavy Nasdaq were at a two-month high after data showed that U.S. consumer prices were unchanged in October amid lower gasoline prices.
In the 12 months through October, the CPI climbed 3.2% after rising 3.7% in September, while economists polled by Reuters had forecast a 3.3% gain on a year-on-year basis.
Core prices, which exclude the volatile food and energy components, rose 4.0% compared to economists’ estimate of a 4.1% increase.
“We’re happy to see both headline and core CPI come in lower than expected. It’s telling us that the Fed is done, there’s nothing left for it to do here,” said Thomas Hayes, chairman at hedge fund Great Hill Capital at New York.
“This is what the Fed was looking for, slowing inflation, slowing labor market and the economy’s holding up at the same time.”
Following the data, traders erased bets the Fed will raise borrowing costs any further and piled into bets on rate cuts starting by May.
U.S. Treasury yields dropped, with the two-year yield , which best reflects short-term interest rate expectations, sliding to two-week lows.
That in turn lifted megacap-growth stocks such as Nvidia , Alphabet, Amazon.com and Tesla up between 1.7% and 5% in early trading.
The small-cap Russell 2000 index jumped 3.3%.
Wall Street’s main indexes have seen a strong rebound in November on expectations that U.S. interest rates were near their peak, even as Fed Chair Jerome Powell last week left the door open to further tightening.
Fed Vice Chair for Supervision Michael Barr is set to testify before the Senate Banking Committee, while investors will parse comments from Cleveland Fed President Loretta Mester and Chicago Fed chief Austan Goolsbee later in the day.
Focus is also on negotiations by U.S. lawmakers over a funding bill, as lawmakers face an end-of-week deadline to fund the federal government.
U.S. House of Representatives Speaker Mike Johnson said on Tuesday he thinks the House will pass a short-term spending bill to avert a partial government shutdown beginning on Saturday.
The Dow Jones Industrial Average was up 330.19 points, or 0.96%, at 34,668.06, the S&P 500 was up 60.77 points, or 1.38%, at 4,472.32, and the Nasdaq Composite was up 256.49 points, or 1.86%, at 14,024.23.
Snap Inc shares jumped 9.2% following news that Amazon.com will allow Snapchat users in the United States to buy some products listed on the ecommerce company directly from the social media app.
Home Depot gained 5.3% after the U.S. home improvement chain beat quarterly profit estimates.
Fisker slid 17.3% after the electric-vehicle startup slashed its 2023 production forecast.
Reuters
