The TSX added 0.37 per cent today, spurred on by lower-than-expected U.S. producer price data.
Tech stocks added a sizeable 2.33 per cent, with investors betting on lower inflation serving as a boon for the last decade’s leading sector in terms of returns.
Real estate stocks added 0.27 per cent as Canadian home sales ticked up 1.3 per cent from September to October, the first MoM gain since February.
Today, the U.S. producer price index for October registered at 8 per cent YoY, comfortably under the 8.3-per-cent estimate, suggesting central bank hawkishness is taking effect.
This easing follows softer-than-expected U.S. CPI data from October. The increase of 0.4 per cent MoM and 7.7 per cent YoY, according to the Bureau of Labor Statistics, fell below Dow Jones estimates of 0.6 and 7.9 per cent, respectively.
In Canada, deflationary signals have been more conflicted, with the CPI rising 6.9 per cent YoY in September, higher than economists’ average estimate of 6.7 per cent, with spending and the labour market showing renewed strength over the fall months.
Conversely, while Canadian home sales have been rising, home prices have been inching lower for eight months due to higher interest rates. The benchmark price fell 1.2 per cent to $756,200 in October, the smallest monthly decline since May. Newly listed properties were up by 2.2 per cent from September to October, outpacing the sales gain.
Additionally, though manufacturing sales were unchanged in September at $70.4 billion, inventories are on the rise amidst weakening business surveys.
Economists tracked by Bloomberg expect Canadian inflation to come in unchanged at 6.9 per cent in October. Fuel prices are likely the main driver behind recently lower CPI – which decelerated from 7 per cent in August and 7.6 per cent in July – as well as the determining factor behind overall price fluctuations over the next few years.
Oil has lost roughly one-third of its value since the summer, with consumption forecast to fall in the near term. The International Energy Agency sees consumption contracting by 240,000 barrels per day in Q4 on a YoY basis. OPEC also cut its Q4 demand forecast.
That said, oil prices will be supported by inventories in developed nations being at their lowest since 2004 as E.U. sanctions on Russian crude begin to influence the market.
The question of whether or not this deflationary trend will lead to a long-term rally remains an open one. The consensus is leaning toward more moderate interest rate hikes from both the U.S. Fed (Dec 14) and the Bank of Canada (Dec 7) as they seek to wrangle prices into submission without hurting demand.
The TSX’s gains across the past month’s rally come to 7.66 per cent. The index is down by 7.62 per cent over the past year.
The U.S. market closed up by 0.67 per cent, bringing its own gains over the past month to 4.95 per cent. The country’s one-year performance stands at -12.83 per cent.
Market movers
With macro data pointing to a potential loosening of monetary policy, our readers have taken the opportunity to dive deeper into tech names whose strong brands and proprietary offerings grant them positive long-term prospects:
POET Technologies (PTK) will use high-speed Directly Modulated Lasers from Lumentum for its 400G, 800G, and 1.6T data centre solutions.
Datametrex (DM) subsidiary, Datametrex Electric Vehicle Solutions, has officially launched its roadside assistance Mobile Charging Vehicle in British Columbia.
Finally, ImagineAR (IP) has partnered with SIDEARM Sports to deliver college football augmented reality experiences this January.
Notable capital raises to start off the week include Charlotte’s Web Holdings, Greenbriar Capital and Consolidated Uranium.
