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S&P/TSX composite up almost 650 points, U.S. markets surge on inflation data

A sign board displays the TSX level in Toronto, Friday, June 4, 2021. THE CANADIAN PRESS/Frank Gunn

Canada’s main stock index was up almost 650 points in a broad-based rally Thursday, while U.S. stock markets also rose after new data showing inflation in the United States eased in October.

The S&P/TSX composite index was up 646.11 points, or 3.34 per cent, at 19,990.36.

In New York, the Dow Jones industrial average was up 1,201.43 points, or 3.70 per cent, at 33,715.37, its biggest points gain since March 4, 2020.

Read more: S&P/TSX composite falls more than 300 points, U.S. markets also down

Read next: Big banks raise prime lending rates to 6.7% after Bank of Canada hike

The S&P 500 index was up 207.80 points, or 5.54 per cent, at 3,956.37,while the Nasdaq composite was up 760.97 points, or 7.35 per cent, at 11,114.15.

Markets were up on U.S. inflation data released Thursday, which was softer than expected, said Anish Chopra, managing director with Portfolio Management Corp.

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Inflation for the U.S. was 7.7 per cent in October, dipping below eight per cent for the first time since February.

Investors are interpreting the data as a sign that inflation in the U.S. has plateaued and may be on its way down, said Chopra.

“It’s certainly a risk-on day today, driven by the U.S. CPI print that came in below expectations,” said Chopra.

That means investors are optimistic that the Fed will be winding down its quantitative tightening campaign, he said.

“The markets have been looking for the signs of a Fed pivot, and certainly the market believes that today is one of the days for that,” said Chopra.

“It appears that the Fed hikes are doing what they’re supposed to do, which is to cool inflation, and that rate increases will continue, but at a slower pace.”

The Canadian dollar traded for 74.75 cents US compared with 74.18 cents US on Wednesday.

Inflation is still quite high, warned Chopra, and one month of data doesn’t tell the whole story.

While inflation appears to be moderating in the goods sector, there are concerns it’s going to be stickier than the Fed would like, embedding itself into wages, said Chopra.

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However, he said it certainly bodes well for Canada’s upcoming inflation data release next week.

“When you look at Canada and the United States, the central banks seem to have been fortunate enough, at least so far, to have ? inflation plateau and keep the economy growing at a very slow pace.”

The December crude contract was up 64 cents at US$86.47 per barreland the December natural gas contract was up 37 cents at US$6.24 per mmBTU.

The December gold contract was up US$40 at US$1,753.70 an ounce and the December copper contract was up six cents at US$3.76 a pound.

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