Canada’s main stock index rose on Monday as higher commodity prices boosted resource shares and the market transitioned to a faster trade settlement standard, while investors looked ahead to more bank earnings this week.
The S&P/TSX composite index ended up 52.51 points, or 0.2%, at 22,373.38, moving closer to the record closing high it posted last Tuesday at 22,468.16.
Trading volume was lower than usual with U.S. markets closed for the Memorial Day holiday.
“The U.S. is closed, commodities are running and investors are waiting for bank earnings across the rest of the week, so there is good reason for optimism in the Canadian market today,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
The materials group, which includes metal miners and fertilizer companies, gained 1.2% as gold prices rose.
Some market strategists continue to expect bullion to soon hit new heights, including UBS analyst Giovanni Staunovo
“We expect gold prices to stay volatile, and price setbacks to be shallow, targeting gold prices to test new record highs later this year,” Staunovo said.
Energy also advanced, gaining 0.3%, as the price of oil increased 1.1% to US$78.55 a barrel.
Canada, Mexico and Argentina started to settle securities trades in one day rather than two, in a move designed to reduce counterparty risk and improve market liquidity. U.S. markets will move to the new standard, commonly called T+1, on Tuesday.
In economic data Monday, Canadian wholesale trade rose 2.8% in April from March, largely driven by higher sales in the motor vehicle and motor vehicle parts and accessories subsector, a preliminary estimate showed.
Bank of Nova Scotia is due to report quarterly earnings on Tuesday, while some of Canada’s other major banks report later in the week. On Thursday, Toronto-Dominion Bank reported better-than-expected earnings even as its U.S segment struggled amid probes related to its anti-money laundering program.
World shares also firmed modestly on Monday as investors braced for a busy run of inflation data that could set the scene for a European rate cut as soon as next week and a U.S. policy easing within just a few months.
On Friday, the U.S. will release figures on core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation.
Median forecasts expect this week will see a rise of 0.3% in the PCE price index in April according to a Reuters poll, keeping the annual pace at 2.8%.
Figures for inflation in the euro zone are also due on Friday and economists believe an expected tick up to 2.5% should not stop the European Central Bank from easing policy next week.
Policymakers Piero Cipollone and Fabio Panetta both flagged a coming cut over the weekend, while markets imply an 88% chance of an easing to 3.75% on June 6.
The Bank of Canada might also ease next week, while the Fed is seen waiting until September for its first move.
Reuters, Globe staff
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