Canada’s main stock index peaked on Monday, with energy stocks leading the charge as the market reacted positively to the U.S. Federal Reserve’s recent interest rate cut. By mid-morning, the Toronto Stock Exchange’s S&P/TSX composite index had gained 0.3%, continuing a streak of record-high closings for the third straight session.
The energy sector saw a notable 1.6% rise, benefiting from stronger oil prices driven by the Fed’s rate cut and a decrease in U.S. crude supply following Hurricane Francine. The surge in oil prices helped lift market sentiment, especially in Canada’s energy-heavy stock market.
Traders are optimistic that the Fed will cut interest rates by another 75 basis points before the end of the year. Eyes are now on economic data releases that could influence the central bank’s next move. According to Chris McHaney, head of investment management at Global X Investments Canada, “Several more interest rate cuts are priced in, and the outlook could shift depending on inflation and economic growth.”
U.S. economic indicators suggest steady business activity in September, but with average prices for goods and services rising at the fastest rate in six months, there are concerns inflation could pick up soon. Investors are now awaiting the Federal Reserve’s preferred inflation measure, the core personal consumption expenditures (PCE) index, due for release on Friday.
On the domestic front, Canadian investors are looking ahead to the country’s GDP numbers for July, also expected this Friday. The TSX has risen 14.1% so far this year, driven by optimism around the Fed’s dovish stance and the Bank of Canada’s decision to cut interest rates three times in 2024. Market consensus expects another rate cut from the Canadian central bank in October.