After a slump for the previous two days, the Toronto Stock Exchange’s benchmark Standard & Poor’s/TSX Composite Index climbed 109.37 points, or 0.82 percent, to close at 13,462.71 points, with all the eight major sectors moving higher, led by Utilities whose shares soared by 2.55 percent in the day.
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The Federal Open Market Committee could raise short-term interest rates for the first time in nine years at its two-day meeting scheduled to begin Wednesday.
Energy was up 0.25 percent when most companies from the oil-patch rebounded higher with Encana up 1.06 percent to 9.51 Canadian dollars (about 7.18 US dollars) a share, and Canadian Natural Resources Ltd. up 0.92 percent to 26.33 Canadian dollars a share.
On matters macroeconomic, Statistics Canada reported this morning that offshore investors reduced their holdings of Canadian securities by $10.1 billion in July, mainly in equity instruments.
According to the United States commerce department Tuesday, the advance estimates of USA retail and food services sales for August increased 0.2 percent from the previous month to $447.7 bn.
“The last few weeks of August were a bit of a Draconian sell-off and I think what we’re seeing now is somewhat of a relief rally”, said George Schultze, who oversees $200-million as founder and managing member of Schultze Asset Management in Purchase, NY.
However, he said, most eyes remain focused on the Fed. “As for inflation, the Fed sees the current weakness as largely temporary”.
Stocks have been volatile since China devalued its currency in August.
“Do it now to remove uncertainty facing emerging markets, but communicate more clearly the nature of the more gradual path, that’s the message”, OECD Chief Economist Catherine Mann said in an interview in Paris. China is Canada’s second-largest trading partner after the U.S. Since World War II, profit growth has fallen by roughly half in the year after a Fed hike, data from Ned Davis Research Group show.
The S&P 500 inched up 0.79 points to 1,978.88, with energy leading nine sectors higher and telecommunications the only decliner.
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However, he said the rally could be short-lived even if rates don’t go up, and that his preference would be for the Fed to increase by 25 basis points and “just say we’re going to go slow here in terms of data dependence”.
