Canada’s main stock index rose on Wednesday after the Bank of Canada kept interest rates unchanged, while signs of cooling inflation in the U.S. boosted investor sentiment on hopes of a dovish Federal Reserve.
At 10:17 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 155.98 points, or 0.76%, at 20,577.83.
The Bank of Canada kept its key overnight interest rate on hold at 4.50% as expected and raised its growth forecast for this year to 1.4% from 1.0% in January, while dropping language that had warned of a possible recession.
“The decision itself really was no surprise,” said Douglas Porter, chief economist at BMO Capital Markets.
“The comment that recent data is reinforcing the governing council’s confidence that inflation will continue to decline in the next few months is somewhat beneficial for equities.”
Across the border, data showed that U.S. headline CPI cooled faster than expected in March, raising hopes that the Federal Reserve could hit pause on its interest rate hiking cycle soon.
Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year eased to 2.892%.
Strength in crude and gold prices against the dollar lifted the energy sector and the materials sector, up 0.7% and 0.8%, respectively.
The rate-sensitive technology sector gained 1.7%, led by a 5.5% rise in shares of Shopify Inc on JMP Securities’ rating upgrade.
The financials sector, a heavyweight on the TSX, advanced 0.6%.
The TSX had gained on the previous three days as well, helped by rising crude and spot gold prices.
Among other major movers, Brookfield Infrastructure fell 2.7% after the company said it would buy intermodal container lessor Triton International Ltd for about $4.7 billion.
U.S. stock indexes were higher on Wednesday after data showed consumer prices cooled faster than expected in March, raising hopes that the Federal Reserve could hit pause on its interest rate hiking cycle soon.
The Labor Department data showed headline and core CPI in March rose 0.1% and 0.4%, respectively, on a month-on-month basis. Economists were expecting a rise of 0.2% and 0.4%, respectively.
On a year-over-year basis, the headline number rose 5% against economists’ estimates of a 5.2% rise, while the core measure, which strips out volatile food and energy prices, climbed 5.6% in-line with consensus estimates.
“Today’s CPI takes some heat off the Fed, for now. Moderating price pressures combined with signs of cooling in the labor market will offer a temporary reprieve to markets,” said Ronald Temple, chief market strategist at Lazard.
“While this is good news, it does not mean tightening is over. Core inflation remains far above the Fed’s target, and the path to 2% will be bumpy.”
Stubbornly high rents kept underlying inflation pressures simmering, likely ensuring that the U.S. central bank will raise interest rates again next month.
Traders mostly stuck to bets that the Fed will hike rates by 25 basis points next month, with Fed fund futures pricing in a 70% chance of such a move.
After the banking turmoil last month, investors were betting that the Fed will soon end its aggressive monetary tightening campaign and also start cutting rates in the back half of the year amid growing concerns of a recession.
Major technology and other growth stocks such as Microsoft Corp, Tesla Inc and Apple Inc edged higher as Treasury yields slipped.
Minutes from the U.S. central bank’s policy meeting in March will also be watched closely by investors later in the day for further clues on the trajectory of interest rates. The Fed raised rates by 25 bps last month and signaled it was on the verge of pausing further rate hikes.
Investors are also awaiting the first-quarter earnings season, which begins in earnest on Friday with results from three major banks, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.
The Dow Jones Industrial Average was up 155.96 points, or 0.46%, at 33,840.75, the S&P 500 was up 13.20 points, or 0.32%, at 4,122.14, and the Nasdaq Composite was up 9.36 points, or 0.08%, at 12,041.24.
American Airlines Group Inc dropped 7.1% as it forecast a lower-than-expected profit for the first quarter as the carrier battles high fuel costs.
The wider airlines index fell nearly 4%.
U.S.-listed shares of Chinese firms Alibaba Group Holding Ltd and JD.com Inc fell almost 4% each as investors weighed rising geopolitical tensions.
Taiwan said on Wednesday it had successfully urged China to drastically narrow its plan to close air space north of the island, averting wider travel disruption in a period of high tension in the region due to China’s military exercises.
Reuters
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