TSX reaches record high in anticipation of a larger US rate reduction

Canada’s main index of stocks hit another record on Friday, in a rally that was led by mining companies. Investors reacted to the overnight surge in expectations for a large U.S. rate cut next Monday.

The Toronto Stock Exchange’s S&P/TSX Composite index rose 143.04 or 0.61% to 23,618.73, and was on track to extend its record-breaking run.

As the market anticipated a larger rate cut from the Federal Reserve during its policy meeting on September 18, at least 11 sectors in the index saw gains.

Materials led the sectoral gains, as gold prices hit record highs on anticipations of U.S. rate cuts.

First Majestic Silver Corp. topped the index.

, Alamos Gold Inc? Alamos Gold Inc.? Up between 3% to 4 %.

Graham Priest, an investment adviser with BlueShore Financial said that a bigger U.S. tax cut “would have a positive impact on the Canadian economy as well as Canadian markets”, because “money would flow into gold”.

Rate decreases are quite beneficial for an economy based on resources.

The Financial Times and Wall Street Journal reported that the rate cut was “very close”.

Bill Dudley, former New York Fed president, argued that a rate cut of 50 basis points would be a good idea. This added uncertainty to next week’s policy decision.

CME’s FedWatch Tool shows that traders’ bets on a 50 basis point are now at 47% compared to 14% last Thursday.

Investors in Canada digested wholesale data which showed that the Canadian industry’s capacity was at 79.1% in the second quarter 2024.

The energy sector, TSX’s heavyweight, gained 0.8% while the financials sector rose by 0.4%. (Reporting and editing by Maju Samuel in Bengaluru, with Nikhil Sharma reporting from Bengaluru)

(source: Reuters)