Canada’s main stock index hit a record high on Wednesday, with mining stocks leading the advance, buoyed by renewed U.S. rate cut optimism and robust earnings from major U.S. banks that signaled strength in the financial sector.
At 10:04 a.m. ET, Toronto’s S&P/TSX composite index was up 1.4% at 30,776.09 points, eclipsing the record intraday high it reached on October 6.
Gains were broad-based, with all major sectors trading in positive territory.
Information technology stocks surged 2.2%, following upbeat third-quarter results from ASML, the world’s largest supplier of computer chip-making equipment.
Meanwhile, safe-haven gold broke through $4,200 an ounce for the first time to extend its record-breaking run, helping lift materials stocks 2.3%.
Strong earnings from U.S. banking giants set an encouraging tone for Canadian lenders, lifting heavyweight financial stocks 0.9%.
“We are seeing the major banks in the U.S. reporting fantastic numbers, and there is no reason to believe Canadian banks will not report good numbers next month,” said Allan Small, senior investment advisor at the Allan Small Financial Group with iA Private Wealth.
Market sentiment also received a boost from Federal Reserve Chair Jerome Powell’s dovish-leaning comments on Tuesday, which refocused attention on growing expectations for rate cuts.
Traders are now pricing in a quarter-point cut at the Fed’s October 28-29 meeting, followed by another reduction in December, according to data compiled by LSEG.
“Lower interest rates help markets, period,” Small said. “The reality is that Canadian equities are heavily influenced by U.S. monetary policy and economic stimulus.”
The Bank of Canada will announce its rate decision on October 29, with markets assigning a 60% probability to a 25-basis-point cut. Those odds have diminished considerably after Friday’s unexpectedly strong employment report.
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