A rising energy sector supported Canada’s main stock index in a continued rally from last week’s brutal performance, while US stock markets returned from vacation to rebound even stronger from their worst week. since the pandemic.
Pierre Cleroux, chief economist at the Business Development Bank of Canada, said the improvement started on Monday with positive moves in Europe that U.S. markets were unable to take advantage of as they were closed on June 16.
“So today, I think it’s just investors taking advantage of low stock prices due to the significant drop in the last week,” he said in an interview.
Comments by US President Joe Biden that a recession was not inevitable were also seen as positive.
But Cleroux doesn’t think those gains have legs in a high level of volatility.
“I don’t think we’re down yet. There’s still a lot of uncertainty about rising interest rates, there’s a lot of talk of a recession, so I don’t think it’s over,” he said.
While the markets are likely near bottom, he said, it will still take some time for a full rebound. That could hinge on positive inflation numbers that show higher interest rates are working.
However, Wednesday’s inflation numbers for May are not expected to be good. And if central banks are unable to stabilize inflation, rates will have to rise more significantly.
“That’s why the market is so worried. So I think we need more positive news before we see a full rebound.
Investors fear that rising interest rates will slow economic growth too much and trigger a recession.
The S&P/TSX Composite Index closed up 73.66 points at 19,257.29, after gaining 253 points earlier in the week. The Toronto market had plunged 6.6% last week in its worst performance in more than two years
In New York, the Dow Jones industrial average rose 641.47 points to 30,530.25. The S&P 500 index rose 89.95 points to 3,764.79, while the Nasdaq composite rose 270.95 points to 11,069.30.
Inflation and interest rate concerns were compounded by a spike in energy prices following Russia’s invasion of Ukraine. The contract price for U.S. crude oil in August rose 1.4% from Friday’s close to settle at $109.52 a barrel on Tuesday. It is up about 45.6 percent for the year. The July natural gas contract was down 13.6 cents from Friday at US$6.81 per mmBTU.
Vermilion Energy Inc. led the energy sector, rising 6.3%, while Meg Energy Corp. increased by 5.7%.
Soaring gasoline prices have been difficult for consumers, but retail sales in Canada still rose 0.9% in April, and the gain in May is expected to be around 1.6%, Statistics Canada announced Tuesday.
The figures show that Canadians are not slowing down their purchases, which is good news for the economy, but not for inflation. Cleroux said it would take longer to fight inflation in Canada because the economy is stronger, while there are already signs it is working in the United States
The Canadian dollar was trading at 77.35 US cents against 76.96 US cents on Monday.
Eight of the TSX’s 11 sectors were up that day. Tech followed the bullish moves in the US with Lightspeed Commerce Inc. up 2.5%.
Materials was also positive despite falling bullion prices.
The August gold contract was down US$1.80 at US$1,838.80 an ounce and the July copper contract was up 2.6 cents at US$4.04 per pound .
Telecommunications fell as shares of Rogers Communications Inc. fell 2.6% on the day after investors cheered the announced $2.85 billion sale of mobile operator Freedom Mobile to Shaw Communications Inc. to Videotron Ltd., owned by Quebecor Inc. The deal could pave the way for final approvals for Rogers’ $26 billion takeover of Shaw.
This report from The Canadian Press was first published on June 21, 2022.
– With files from the Associated Press.