The TSX gained 0.28 per cent today on optimism in crude oil and metals markets.
Energy stocks rose by 1.38 per cent, though oil is harbouring a 9-per-cent loss this month on fears of slowing consumption.
The materials sector added 3.15 per cent, supporting the view that a new commodity supercycle, catalyzed by energy metals and other inflation-friendly minerals, will ride through macro hindrances like the Russia-Ukraine War and COVID-induced supply chain disruptions.
Both sectors were spurred on by Chinese protests potentially putting an end to the country’s Zero-COVID policy and re-igniting demand from the world’s leading crude importer, which is also the second-largest economy next to the U.S. Chinese officials have also begun to speak publicly in favour of expedited vaccine rollouts to minimize lockdown severity.
Though analyst consensus sees rising rates stifling economic growth into 2023, the TSX also reacted positively to Canadian economic growth of 2.9 per cent YoY in Q3, according to Statistics Canada. The measure includes growth in real GDP of 0.7 per cent, higher than the agency’s preliminary estimate of 0.4 per cent, led by an increase in oil exports, non-residential structures and business investment in inventories to hedge against higher prices.
Housing investment and household spending both declined, which is in line with falling consumer confidence, according to Bloomberg, and migration toward cash, GICs and short-term bonds as yields and market volatility continues to rise.
While the TSX’s returns have been a leading light compared to other global markets, increases in bad debt provisions due to an oncoming recession may affect the performance of the Big Six banks over the short term. Conversely, today’s announcement of RBC’s acquisition of HSBC Bank Canada casts a vote against that possibility.
U.S. stocks added 0.52 per cent despite consumer confidence slipping to a four-month low, according to The Conference Board, due to uncertainty about the Fed’s monetary tightening campaign and its effect on citizens’ bottom line.
Gains were led by U.S.-listed Chinese shares rising in reaction to the aforementioned Chinese government support for more leniency during COVID lockdowns.
The past 12-14 months have seen U.S. tech giants such as Amazon, Alphabet and Meta experience their first prolonged downtrend since establishing market dominance in and around the Great Financial Crisis of 2008. This has resulted in tens of thousands of layoffs at these once-invincible firms.
From a global perspective, over half of the world’s market cap is above its 200-day moving average. This follows a rally over the past 60 days fueled by the first inflation downtrend since the pandemic began, with Canada gaining over 10 per cent, the U.S. roughly 8.5 per cent, Emerging Markets 11.5 per cent, and Developed International a sizeable 16 per cent.
Whether the rally turns out to stem from a bear market or a new bull run will depend on central banks’ ability to slow inflation back to long-term averages without tipping their countries into a recession. Officials will be hoping for a smooth downtrend in productivity and employment to allow for proportional decreases in borrowing costs, all the while remaining ready to pivot should secular factors impede their plans.
Market movers
Caught between the thrill of a stock market rally and the unsustainability of record inflation without economic fallout, our investor community has started the week with its sights on two conflicting theses, 1) a return to big tech’s leading ways and 2) a new normal spearheaded by the electrification revolution:
Shopify (SHOP) announced a record-setting Black Friday with sales of $3.36 billion.
First Hydrogen (FHYD) has selected Shawinigan, Quebec, to develop its first green hydrogen ecosystem.
Finally, E3 Lithium (ETL) has received $27 million from the Government of Canada’s Innovation, Science and Economic Development Fund to support oilfield lithium extraction.
New capital raise announcements include Silver Elephant Mining, Fathom Nickel, Aurwest Resources and P2 Gold.
