Strength in energy and base metal stocks helped Canada’s main stock index gain more than 100 points Tuesday, while U.S. stock markets were mixed ahead of fresh inflation data to be released Wednesday, which could help illuminate the Federal Reserve’s interest-rate path.
“Stock markets were fluctuating ahead of tomorrow’s highly-anticipated report on US consumer prices, which is likely to cement the case for another quarter-point rate hike from the Federal Reserve in May,” said Candice Bangsund, vice-president and portfolio manager at Fiera Capital, in an email.
U.S. markets underperformed against the S&P/TSX composite, which was buoyed by energy and base metals, rising 146.03 points to 20,421.85. Meanwhile, the Nasdaq was down 52.48 points at 12,031.88 and the S&P 500 ticked lower as well, down 0.17 points at 4,108.94.
The Dow Jones industrial average was up 98.27 points at 33,684.79.
Technology stocks lagged by a wide margin Tuesday with the prospect of another rate hike in the U.S. sending Treasury yields higher, said Bangsund.
But Bangsund said the real market driver will be what comes after the Fed’s decision.
“Stock markets have extended their recent streak of gains as investors continue to brace for a less-aggressive policy trajectory from the Federal Reserve, with speculation mounting that policymakers may have to abandon their tightening plans in response to the banking crisis,” she said, adding that the market is currently pricing in at least half a percentage point of rate cuts before the end of the year, an expectation that’s at odds with inflation’s too-slow decline.
The International Monetary Fund warned Tuesday that the possibility of a hard landing in many economies has “risen sharply,” with inflation proving stickier than anticipated and interest rates rising to fight it, jeopardizing banks along the way.
However, despite its gloomy predictions, the Fund upgraded its economic expectations for the U.S. and Europe, which have been more resilient than expected.
U.S. Treasury Secretary Janet Yellen said Tuesday that the American economy and banking system remain sound.
After reaching a bottom in mid-March, crude oil is now trading above US$80 a barrel, thriving on last week’s surprise production cut announcement from OPEC plus, said Bangsund. The cuts threaten to restrain an already tight market, she said, noting that oil has also been supported by China’s reopening, shrinking U.S. inventories and a weakening U.S. dollar.
The Canadian dollar has gained alongside crude oil, with extra help from the U.S. dollar, trading for 74.17 cents US compared with 73.93 cents US on Monday.
And Bitcoin broke past US$30,000 in a sustained rally, with the digital coin up about 80 per cent since the beginning of the year.
The May crude contract was up US$1.79 at US$81.53 per barrel and the May natural gas contract was up a penny at US$2.19 per mmBTU.
The June gold contract was up US$15.20 at US$2,019.00 an ounce and the May copper contract was up four cents at US$4.02 a pound.
– With files from The Associated Press
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