The TSX edged into the green today on gains in energy and materials companies.
The energy sector rose by 2.99 per cent as of 12:44 pm EST tracking 3.56-per-cent gains for WTI. The market expressed concern over tight supply after Saudi Arabia spoke of OPEC+ cuts to put a floor on prices. The commodity has been on a week-long rally from US$85.68 per barrel to the US$94 range.
The materials sector added 2.32 per cent as of 12:46 pm EST spurred on by gains in gold of 0.78 per cent to US$1,762.10 per ounce.
The financial sector had slipped by 0.88 per cent as of 12:42 pm EST due to analysts’ low earnings expectations for the big six banks. Consensus sees increased provisions for credit losses as the culprit as delinquencies rise with inflation and interest rates.
The sector is at the mercy of the relationship between strong loan growth on higher rates and potential defaults stemming from a hawkish Bank of Canada (BoC).
Scotiabank was down 4.46 per cent as of 12:58 pm EST after missing its Q3 earnings estimate. Royal Bank and National Bank report tomorrow with TD and CIBC scheduled for August 25 and BMO for August 30.
Lower July inflation readings in both the U.S. and Canada suggest that the FED and the BoC may pull back on rate hikes, though more granular data tempers this notion. The price of food increased by 9.9 per cent YoY in July, according to Statistics Canada, while unemployment remains at a historic low of 4.9 per cent, and four-out-of-five Canadians cut spending in recent months, based on data from the Angus Reid Institute.
Additionally, industrial productivity and consumer demand will likely find a boost from yesterday’s deal between Moderna and the Canadian government. The pharma company will supply 12 million doses of its vaccine against the Omicron variant of COVID-19. The public rollout should begin this fall, contingent on Health Canada approval.
The price of oil, another demand driver, is wavering between competing interests. On the one hand, while OPEC+ has nixed all of its pandemic output cuts, Saudi Oil Minister Prince Abdulaziz bin Salman suggested the cartel may need to cut production again to reduce volatility and increase liquidity. On the other hand, consumers worldwide suffer due to high fuel prices, which put a ceiling on demand.
Crude will likely remain stable for the time being in response to stalled discussions about activating Iranian supply and disruptions in Kazakh exports stemming from potential mooring damage at the main terminal for CPC Blend.
This is worrying news for Europe, where economic activity has shrunk for two straight months, and natural gas has soared to 15 times the average summertime price from Russian supply cuts.
Russia has been operating the Nord Stream pipeline at 20-per-cent capacity for weeks, a tactic European officials see as retaliation for sanctions connected to the war in Ukraine. Beginning on August 31, the pipeline will undergo three days of maintenance on the only turbine currently in operation, which is stoking uncertainty for leading economies such as Germany and France.
While central banks assess geopolitical tensions and work to cool their overheating economies, growing recessionary fears provide a silver lining for Canadians at the pump. The average price per litre of unleaded gas was down around C$0.20 in July to C$1.87, with a further decrease expected this month.
The TSX closed up by 0.05 per cent nursing gains of 4.76 per cent over the past month. The total U.S. market shed 0.75 per cent, though it remains ahead by 5.5 per cent from a month ago. Developed International and Emerging Markets, both slightly down for the day, have registered more modest gains since mid-July due to fuel shortages and U.S. dollar strength.
Market movers
Our investor community has gravitated toward miners to start off the week in search of favorable prospects amidst high inflation:
CanAlaska (CVV) confirmed new high-grade uranium mineralization at West McArthur.
Jourdan Resources (JOR) has begun the phase III summer drill campaign at its Vallée Lithium Project in Québec. The company is confident it will significantly expand the known deposit on the property.
Finally, Uranium Energy has finalized its acquisition of UEX Corp. (UEX).
Capital raises kicking off the week include Spectra7 Microsystems, Tiidal Gaming, Hemostemix, Trillium Gold Mines, VR Resources and Global Battery Metals.
