(Toronto) The Toronto Stock Exchange ended Monday’s session higher, supported in particular by strength in the energy and battery metals sectors, while U.S. stock markets were closed for the Memorial Day holiday.
The composite index S
Canadian markets typically steer based on movements in U.S. markets, so with no major news for investors to react to, it’s been a quiet day for the TSX, said Lesley Marks, chief equity investment officer at Mackenzie Investments.
However, on Tuesday, US investors will react retroactively to the interim US debt ceiling agreement reached over the weekend, after weeks of negotiations. President Joe Biden and Speaker of the House of Representatives Kevin McCarthy have agreed to avoid a government default.
“Markets were positive heading into the weekend,” Ms. Marks noted, thanks to rumors that a deal had been struck — although she felt such a deal was to be expected. Legislative hurdles still need to be cleared, but investors will likely be happy to shake off the uncertainty the market talks generated, distracting attention from other important matters.
The big question mark that will continue to weigh on the markets now will be the next decision of the United States Federal Reserve on its interest rates. The central bank may decide to suspend rate hikes at the mid-June meeting, Marks said.
Market expectations have bifurcated on this, she said. While Fed Chairman Jerome Powell has signaled that a pause could occur data permitting, some of the most recent economic data releases have left investors uncertain as to which path the bank might take.
Meanwhile, the continued resilience of the economy, particularly that of the labor market, means that market expectations for possible rate cuts in 2023 are diminishing, Marks observed.
“The likelihood of a decline this year is all but gone,” she noted.
If the U.S. central bank were to choose to raise interest rates again, it would put the Bank of Canada in a difficult position, as it is problematic that its monetary policy deviates significantly from that of its southern neighbor, explained Ms. Marks. Canada’s central bank already suspended rate hikes earlier this year.
This week will notably see the release of new data on Canada’s gross domestic product (GDP), which should help the central bank prepare for its own June decision. In addition, the United States will get the most recent numbers on job vacancies.
In the currency market, the Canadian dollar traded at an average price of 73.57 cents US, up from 73.41 cents US on Friday.
Crude oil prices rose 37 US cents to US$73.04 per barrel and natural gas prices fell 6 US cents to US$2.36 per million BTU.
The price of gold fell US$1.90 to US$1961.20 per ounce and that of copper depreciated 1 US cent to US$3.67 per pound.