Canada’s main stock index rose on Monday, helped by gains for the energy and consumer staples sectors, as investors weighed a Bank of Canada business survey that could leave the door open to interest rate cuts in the first half of the year.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 71.66 points, or 0.3%, at 21,061.88, stopping just short of the 20-month high it notched last Monday at 21,074.91.
Trading volumes were lower than usual, with U.S. markets closed for the Martin Luther King Jr. Day holiday.
Canadian firms say their order books declined as interest rates crimped consumer spending, and they see inflation easing despite increased concerns over wages for the next year, the central bank said in a quarterly survey.
“The report should make the Bank of Canada feel a little better that inflationary pressures and expectations are normalizing, albeit not by quite enough yet to bring an early interest rate cut,” Andrew Grantham, a senior economist at CIBC Capital Markets, said in a note. “We continue to expect a first move in June.”
Canada’s consumer price index report for December is due on Tuesday, which could offer additional clues on the central bank’s policy outlook. Economists expect inflation to rise to 3.4% from 3.1% in November.
The energy sector rose 0.9% as the price of oil clawed back much of its earlier decline. U.S. crude oil futures were down 0.3% at $72.50 a barrel. The Middle East conflict’s limited impact on crude output prompted profit taking after oil benchmarks gained 2% last week.
Several tanker owners avoided the Red Sea and multiple tankers changed course on Friday after U.S. and Britain launched strikes against Houthi targets in Yemen after the Iran-aligned group’s attacks on shipping in response to Israel’s war against Hamas in Gaza.
The conflict has also held up at least four liquefied natural gas tankers traveling in the area.
“The realization that oil supply has not been adversely impacted is leading last week’s bulls to take profit, with the move down somewhat exacerbated by a slightly stronger [U.S.] dollar,” said Tamas Varga of oil broker PVM.
There have been no oil supply losses so far, but the shipping disruption is indirectly tightening the market by keeping 35 million barrels at sea owing to longer journeys shippers must take to avoid the Red Sea, Citi analysts wrote.
Meanwhile, the U.S. and Canada are dealing with frigid weather that is shutting in some oil production. North Dakota oil output has fallen by 400,000-425,000 bpd on extreme cold and related operational issues, the North Dakota Pipeline Authority estimated on Monday.
“Cold weather is impacting production, but (prices) seem to be down on the perception that this cold snap is going to break soon,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
The economic situation also remains somewhat gloomy, with the European Central Bank warning it is too early to discuss cutting interest rates.
Elsewhere on the TSX, consumer staples added 0.8% and utilities ended 1.1% higher.
Shares of Thomson Reuters Corp gained 0.9% as the company raised its offer to buy Sweden’s Pagero and said it now controls about 54% of the company.
Reuters, Globe staff