(Updates at market close, adds new comment)
By Shashwat Chauhan and Divya Rajagopal
Oct 17 (Reuters) – Resource-rich Canada’s main stock index rose on Monday in an upbeat start to the week as higher crude and gold prices boosted shares of energy and mining companies, some traders betting that the market has bottomed out.
The Toronto Stock Exchange’s S&P/TSX Composite Index jumped 1.61% to 18,621.02, also reflecting strong gains on Wall Street. Yet the Canadian benchmark is down 12.2% this year.
Optimism surrounding China’s continued accommodative monetary policy led to marginal gains in crude prices, pushing energy stocks up 1.3%. Global markets were comforted on Monday by better-than-expected profits from two major US banks as well as new UK Finance Minister Jeremy Hunt’s reversal of several elements of Prime Minister Liz Truss’ economic growth plan.
“I think the market has bottomed out,” said Steve Palmer, founding partner of Alpha North Asset Management.
“Investor sentiment is worse on many metrics than it was during the global financial crisis, which I don’t think is warranted.”
A Bank of Canada survey showed Monday that the business climate has softened in Canada, with many companies expecting slower sales growth amid rising interest rates and a majority believing now that a recession is likely within the next 12 months.
A separate survey showed that consumers’ short-term inflation expectations were at record highs, although longer-term expectations eased, bringing some relief.
“I also think inflation is going to come down significantly in the coming months, which is worrying everyone,” Palmer added.
Traders are pricing in a 76.8% chance of a 50 basis point rise in the BoC next week. So far this year, the bank has raised interest rates by 300 basis points. “If it’s 50, I think that would give a signal to most people that rate hikes are starting to slow,” said Allan Small, senior investment advisor at Allan Small Financial Group at iA Private Wealth.
“If it’s 75, I think that’s going to leave a (bad) taste in all of our mouths (and lead to) more uncertainty about how far the Fed will continue to go.”
Rogers Communications gained 1.6%, while Shaw Communications rose 0.4% after Canada’s Competition Tribunal agreed to mediate between Rogers, Shaw and the agency over the $20 billion deal Canadian dollars from Rogers for the purchase of Shaw.
The materials sector, which includes miners, rose 1.7%. (Reporting by Shashwat Chauhan and Amruta Khandekar; Editing by Subhranshu Sahu, Anil D’Silva and Deepa Babington)