Canada’s main stock index rose to a record intraday high on Tuesday, led by gains in communication and industrial shares, after a report said the United States and Iran were nearing an arrangement to end their six-month conflict.
At 11:33 a.m. ET, the S&P/TSX Composite Index was up 107.71 points, or 0.3 per cent, at 36,566.04.
The index was on track to extend its record closing streak, building on momentum from last week’s softer-than-expected U.S. jobs data and stronger corporate earnings.
Pakistan’s Defence Minister Khawaja Asif told Bloomberg News on Tuesday that recent signals pointed to a peace agreement being close, shortly after Qatar’s foreign ministry said talks between Iran and Oman had reached an advanced stage.
Brent crude futures reversed earlier gains after touching a one-week high in the day. Canada’s energy sector nonetheless rose 0.3 per cent, supported by still-elevated oil prices.
Brian Madden, chief investment officer at First Avenue Investment Counsel, said there is very little merchandise flowing through the Strait of Hormuz. “Oil markets are tight and investors are coming to terms with that,” he said.
Higher oil prices have supported the energy sector, which is up 40.8 per cent this year. However, worries that a prolonged supply disruption could fuel inflation and muddy the outlook for monetary easing limited gains elsewhere in the market.
U.S. inflation figures due on Wednesday could offer clues on the Federal Reserve’s policy path.
Among index sectors, capped communication gained 1.2 per cent with telecom provider BCE rising 3 per cent after BofA Global Research raised it to “buy.”
Industrials advanced 0.7 per cent. Technology was the only sector in negative territory, falling 0.7 per cent.
“In Canada, the industrial sector is ripe with opportunity because of some of the fiscal and industrial-policy initiatives underway,” Madden said.
Air cargo operator Cargojet jumped 4.6 per cent after its second-quarter revenue beat estimates.
U.S. stocks are hanging around their records on Tuesday, while oil prices keep swinging on uncertainty about when the war with Iran will allow crude to flow freely again.
The S&P 500 added 0.1 per cent and remained near its all-time high set on Friday. The Dow Jones Industrial Average was up 7 points, or less than 0.1 per cent, and the Nasdaq composite was nearly unchanged.
The action was more unsettled in the oil market, where the price for a barrel of Brent crude briefly jumped above US$90 in the morning before falling back below US$87. It was most recently at US$87.99, up 0.3 per cent from Monday’s settlement price.
Such swings have become typical since the United States and Israel attacked Iran in late February, which led to the closure of the Strait of Hormuz and kept much of the world’s oil pent up in the Middle East. Last month alone, Brent’s price veered between US$72 and US$102 per barrel.
Higher oil prices make inflation worse, and they’ve sent the average cost for a gallon of regular gasoline to US$4.01, according to AAA. That’s up from less than US$3.14 a year ago, though it’s down from last week’s nearly US$4.09.
That has Wall Street’s attention focused on Wednesday, when the U.S. government will release the latest monthly reading on inflation. Economists expect it to show inflation remains high but that it decelerated to 3.4 per cent in July from 3.5 per cent in June.
That could help the Federal Reserve, whose members are notably split on whether they should be raising the country’s interest rates to keep a lid on inflation. While higher rates could help slow the increases of prices on store shelves, they would also slow the overall U.S. economy by making it more expensive for U.S. households and businesses to borrow money. They would also undercut prices for stocks and other investments.
Traders are betting on a coin flip’s chance that the Fed will raise its main interest rate at its next meeting in September, according to data from CME Group. If it does, that would be the first increase in more than three years. It also could anger President Donald Trump, who has been lobbying for lower interest rates.
Treasury yields have jumped since the war with Iran because of higher oil prices and worries about inflation, sending long-term mortgage rates to their highest levels in a year .
The 10-year Treasury yield eased back Tuesday, falling to 4.68 per cent from 4.72 per cent late Monday. But it remains well above its 3.97 per cent level from before the war with Iran.
On Wall Street, Cardinal Health rose 1.5 per cent after becoming the latest big U.S. company to report a stronger profit for the spring than analysts expected.
Businesses have blown past analysts’ forecasts, which Wall Street loves because stock prices tend to follow the path of corporate profits over the long term.
Aramark, the food company and facilities manager, rallied 9.7 per cent after reporting stronger profit and revenue for the latest quarter than analysts expected.
They helped offset a drop of 19.1 per cent for On Holding. The Swiss sneaker company also topped analysts’ forecasts for profit in the latest quarter. But it gave a forecast for upcoming revenue that fell short of analysts’ expectations, while saying it does not want to slash prices to drum up more sales.
Intel slipped 0.2 per cent after it said it would sell US$20-billion of its stock at US$95 per share. That’s up from the US$15-billion that it said it would sell the day before, and such moves dilute the ownership stakes of people who already own Intel stock.
Intel plans to use the cash it’s raising for investments to take advantage of the boom in demand for artificial-intelligence technology.
In stock markets abroad, indexes edged higher in Europe following a mixed finish in Asia. Hong Kong’s Hang Seng fell 1.1 per cent for one of the world’s bigger moves.
Reuters and The Associated Press