What’s going on here?
Canada’s S&P/TSX index surged to an all-time high, driven by gains in the tech sector as the index added 128.1 points to reach 24,096.6, extending its winning streak to four weeks.
What does this mean?
The S&P/TSX composite index’s rise was largely fueled by positive US job data, indicating a boost in payrolls and a drop in unemployment to 4.1%. This eased investor worries about an economic downturn, potentially reducing the need for steep US interest rate cuts. Confidence in a soft economic landing is on the rise, with the odds of a 25-basis point rate cut by the US Federal Reserve in November now pegged at 92.5%. Notably, the information technology sector led the gains with a 1.1% rise, alongside strong showings from financials and consumer discretionary. Meanwhile, Canada’s energy sector saw a lift from rising oil prices amid geopolitical tensions, marking its fifth consecutive day of gains. However, the increase in Canada’s 10-year benchmark yield weighed on rate-sensitive sectors like real estate and utilities.
Why should I care?
For markets: Tech leads the charge.
The strong performance of tech stocks is setting a positive tone for Canada’s markets. With financial and consumer discretionary sectors also seeing gains, investors are optimistic about sustained economic strength. Yet, as interest rates impact rate-sensitive sectors like real estate and utilities, these areas might face challenges despite the broader market’s upbeat outlook.
The bigger picture: Global trends catch up.
As Canada’s economic activity rebounds and inflationary pressures diminish, the global economic landscape is stabilizing. The Ivey PMI showed the slowest price increases in months, hinting that the worst may be over. Nonetheless, geopolitical tensions are a concern, particularly in energy markets, as they could disrupt oil supplies and affect global economic dynamics.