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S&P/TSX composite posts small gain Monday, U.S. stock markets also up

Click to play video: 'Impacts of Bank of Canada rate cut'
Impacts of Bank of Canada rate cut
WATCH ABOVE: The Bank of Canada ended all the speculation and lowered interest rates Wednesday – the first decline in 4 years. It comes on the heels of a weak jobs report, which has everyone asking what's next for interest rates? With more on this we bring in our financial analyst, Michael Campbell – Jun 9, 2024

Strength in the energy, technology and base metal sectors helped Canada’s main stock index post a small gain on Monday, while U.S. stock markets also rose.

The S&P/TSX composite index closed up 62.76 points at 22,069.76.

In New York, the Dow Jones industrial average was up 69.05 points at 38,868.04. The S&P 500 index was up 13.80 points at 5,360.79, while the Nasdaq composite was up 59.40 points at 17,192.53.

The TSX benefitted Monday from a rally in oil prices as they recovered from a recent pullback over concerns about demand, said Angelo Kourkafas, senior investment strategist at Edward Jones.

“As we head into the summer months, demand looks to be holding up. We’re not seeing any major downshift in economic activity,” he said.

Last week’s interest rate cut by the Bank of Canada was a positive sign for investors that a soft landing is increasingly likely, said Kourkafas.

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U.S. markets were muted ahead of a big week, with the latest inflation data and the U.S. Federal Reserve’s interest rate decision both slated for Wednesday.

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The combination of these two “has the potential for some volatility or some adjustment in interest rate expectations,” said Kourkafas.

The expectation is that the Fed will hold rates steady, he said, but investors will be focused on the Fed’s “dot plot,” or its projection for where interest rates will go during the remainder of the year.

The last time the Fed released its projections for its key rate, it looked like three cuts were in the cards for 2024. But since then, a series of stronger-than-expected economic reports have cast uncertainty over when the central bank will begin cutting, meaning the Fed’s projections could be lower this time, said Kourkafas.

“Inflation has proved a little bit more sticky, but the April reading was encouraging,” he said.

Despite central banks in Canada and Europe both starting to cut last week, the Fed is in no hurry to join them, said Kourkafas, as it’s looking for a pattern of more encouraging economic data first.

Last week’s stronger-than-expected U.S. jobs report curbed bets for rate cuts to begin in September, he added, and this week’s CPI report could shift expectations again.

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Semiconductor giant Nvidia rose 0.75 per cent on Monday on the first trading day for the company after a 10-for-one stock split.

The company has been “at the epicentre of the AI enthusiasm,” said Kourkafas.

The Canadian dollar traded for 72.65 cents US compared with 72.78 cents US on Friday.

The July crude oil contract was up US$2.21 at US$77.74 per barrel and the July natural gas contract was down one cent at US$2.91 per 1,000 cubic feet.

The August gold contract was up $2 at US$2,327 an ounce and the July copper contract was up six cents at US$4.54 a pound.

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