Open: TSX starts higher on global optimism and improving healthcare
Canada’s main stock index opened slightly higher on Monday, reflecting upbeat global sentiment and gains in healthcare stocks, although trading volumes remained weak during the US holiday.
As of 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite Index was up 26.2 points, or 0.12%, at 21,383.76.
European stocks rebounded from Friday’s losses on Monday as investors focused on corporate earnings and U.S. Federal Reserve policymakers entered a quiet period ahead of their meeting next week.
Stock market movements in Asian trading were weak and economic data from China was mixed: industrial production recovered but retail sales beat expectations.
China’s central bank unexpectedly eased policy by cutting rates on medium-term loans.
Analysts expect further policy easing as growth in the world’s second-largest economy showed signs of slowing after its rapid rebound from the COVID-19 crisis.
The MSCI World Equity Index, which tracks stocks from 50 countries, remained stable. Europe’s STOXX 600 rose 0.6%, having recouped most of Friday’s losses.
Markets in the United States are closed for a holiday, but S&P 500 futures rose 0.2% and Nasdaq futures 0.1%.
Expectations of central bank policy tightening to tackle persistent inflation mean equities have generally struggled to make gains so far this year and investors are shifting from growth stocks to performance stocks. value.
Investors are focused on corporate earnings, which will need to be strong to avoid further losses. Goldman Sachs, BofA, Morgan Stanley and Netflix release their results this week.
Marija Veitmane, senior multi-asset strategist at State Street Global Markets, said she will look to see how the costs of rising prices and labor shortages have affected corporate earnings, as well as how companies will spend the money on their balance sheets.
“One thing that was a very positive surprise for us last year, particularly towards the end of the year, was the strength of corporate margins,” Veitmane added.
“Companies were able to pass on higher costs to the end consumer and that was really encouraging news for us. That’s exactly what we’re looking for this time around.
The US Federal Reserve meets on January 25-26 and investors expect a cycle of rate hikes to begin in March. Rate hikes tend to hurt riskier assets such as stocks.
Speculators’ net bearish bets on benchmark 10-year U.S. Treasury bond futures hit their highest level since February 2020, just before the pandemic began, according to data from the Commodity Futures Trading Commission released on Friday.
The yield on the 10-year US Treasury hit a two-year high last week. The implied yield on futures rose to 1.85% early Monday.
The US Dollar Index rose 0.1% on the day to 95.329, hanging on to its recent rally. The euro was at $1.1396.
Ahead of the conclusion of a Bank of Japan policy meeting on Tuesday, the dollar was up 0.3% against the yen at 114.555.
Eurozone government bond yields rose slightly, with the German benchmark 10-year yield at -0.034%.
Brent crude futures hit their highest level in more than three years as investors bet supply will remain tight amid tight production by major producers as global demand remains undisturbed by the variant of the Omicron coronavirus.
Bitcoin was a bit lower, around $42,637.
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