S&P/TSX composite gains 150 points led by energy stocks, U.S. stock markets also rise

Canada’s main stock index rose about 150 points on the strength of the energy sector, and the US stock market also rose.

The S&P/TSX Composite Index rose 149.78 points to 20,376.57.

Edward Jones investment strategist Craig Fehr said Canadian markets breathed a “sigh of relief” on Tuesday after the latest inflation report.

Inflation eased to 2.8% in June from 3.4% in May, according to Statistics Canada.

“This is broadly in line with what we’ve seen in the U.S. last week, and I would say it’s broadly consistent with the trends we’ve seen in consumer prices for some time,” Fehr said.

But Fehr said the fact that energy costs are much lower than they were a year ago and that the core inflation policy is not as rosy as the headlines might suggest has helped keep headline inflation down.

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“Core inflation is still high enough to alarm the Bank of Canada,” he said, but not high enough to justify the central bank’s “new more aggressive stance.”

“I think it probably supports the Bank of Canada’s argument that it will keep its policy rate unchanged for a while until it sees core inflation continue to fall,” Fehr said.

In New York, the Dow Jones Industrial Average rose 366.58 points to 34,951.93, the S&P 500 index rose 32.19 points to 4,554.98, and the Nasdaq Composite rose 108.69 points to 14,353.64.

Fehr said Tuesday’s gains in markets on both sides of the border reflected confidence as inflation continued to fall, adding that new U.S. economic data helped support the view that the economy remains resilient even as inflation slows.

Fehr said the so-called “Goldilocks scenario,” in which inflation is successfully contained without a dramatic slowdown, has yet to be agreed, but the prospects for a soft landing are certainly increasing.

He expects another recession in the second half of the year, but it won’t necessarily be a “traditional recession.”

“Indeed, wouldn’t we see some kind of rolling phase where parts of the economy are already in contraction territory?

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With a little more confidence, Fehr said investors could shift some attention to earnings in the second quarter.

“The market is really starting to pay attention to what U.S. and Canadian companies are doing and to see if the economy can sustain its earnings story as it has been,” he said.

Crude oil prices rebounded from the previous day on Tuesday after Monday’s announcement showed weakness in the Chinese economy.

The Canadian dollar traded at 75.82 cents US to 75.83 cents on Monday.

Crude oil contracts rose by US$1.58 to US$75.66 per barrel in September, while natural gas contracts in August rose by 12 cents to US$2.63 per mmBTU.

Gold for August rose US$24.40 to US$1,980.80 an ounce, while September copper dropped one penny to US$3.83 per pound.

© 2023 Canadian Press

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