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S&P/TSX composite climbs to record high as gold rises on slow path to rate hikes

·4 min read

TORONTO — Canada's main stock index set record highs as strong earnings drove gains by individual companies and the price of gold rose on signs that global central banks are in no hurry to raise interest rates.

The December gold contract was up US$29.60 at US$1,793.50 an ounce. The 1.7 per cent increase appears to be the result of global central banks being less aggressive about rate hikes, said Anish Chopra, managing director with Portfolio Management Corp.

The Bank of England didn't increase rates Thursday as expected, one day after the U.S. Federal Reserve said move to taper its stimulus program doesn't necessarily mean rates will soon rise.

"As a result of that, investors concerned about inflation would look for an inflation hedge because if the rates may not be going up, what can hedge an investor against inflation, and that's certainly gold," he said in an interview.

Higher gold prices helped the materials sector, which climbed even as the December copper contract was essentially flat at US$4.32 a pound.

The S&P/TSX composite index gained 77.03 points to a record close of 21,342.13 after hitting an intraday peak of 21,381.25.

U.S. markets were mixed and relatively flat. In New York, the Dow Jones industrial average was down 33.35 points at 36,124.23. The S&P 500 index was up 19.49 points at 4,680.06, while the Nasdaq composite was up 128.73 points at 15,940.31.

Chopra said markets were digesting news from the Fed while awaiting Friday's jobs report from October.

The U.S. employment numbers are expected to be good with the COVID-19 impact on businesses slowly receding as more states are reopening more fully.

On Thursday, the weekly first-time unemployment claims decreased to the lowest level since the start of the pandemic with 269,000 people making claims.

October's non-farm payrolls number will give investors and the Fed more data about the strength of the U.S. economy.

The Fed said it would adjust the timeline for cutting bond purchases and raising rates if required. Chopra said he doesn't believe Fed chairman Jerome Powell and the central bank would hesitate to adjust if inflation was running too hot.

"He's going to be patient but if the data show that the U.S. economy is strengthening far more rapidly than they thought, inflation numbers continue to stay high, the Federal Reserve would most likely have to make a move on the interest rate front."

Statistics Canada is scheduled to release Canadian jobs data for October on Friday.

Strong quarterly results prompted the consumer discretionary and staples sectors to lead the TSX.

Spin Master Inc. shares surged 14.6 per cent, Gildan Activewear Inc. rose 6.8 per cent and Maple Leaf Foods Inc. gained 11.6 per cent after reporting results.

Energy rose nearly one per cent despite lower crude oil prices.

The December crude oil contract was down US$2.05 at US$78.81 per barrel and the December natural gas contract was up 4.6 cents at US$5.72 per mmBTU.

Shares of Suncor Energy Inc. and Vermilion Energy Inc. climbed 2.7 and 2.3 per cent, respectively.

The Canadian dollar traded for 80.33 cents US compared with 80.53 cents US on Wednesday.

Meanwhile, technology dropped 1.8 per cent as shares of Lightspeed Commerce Inc. plunged 27.6 per cent after the Montreal company lowered its full fiscal 2022 guidance and warned that supply chain issues are impacting merchants' ability to stock inventory and affecting its own ability to add new customers who require Lightspeed hardware.

Partially offsetting Lightspeed's decrease was a 3.7 per cent gain by Shopify Inc. It followed the path of the tech-heavy Nasdaq as low interest rates are supportive for technology stocks whereas financials and other sectors benefit from higher rates.

Financials was one of three laggards on the day even though Canada's financial services regulator lifted COVID-19-related restrictions and said banks and insurers are free to increase dividends, resume share buybacks and raise executive compensation as of Thursday.

This report by The Canadian Press was first published Nov. 4, 2021.

Companies in this story: (TSX:LSPD, TSX:SHOP, TSX:SU, TSX:VET, TSX:TOY, TSX:GIL, TSX:MFI, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press

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