Midday: TSX rises as energy sector gains, China relaxes COVID restrictions

Canada’s main stock index jumped to a nearly two-week high on Tuesday as energy stocks gained, while China’s easing of COVID-19 restrictions raised hopes for stronger global growth.

As of 10:42 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite Index rose 165.37 points, or 0.86%, to 19,423.69, extending its rally for the third straight session. .

The heavyweight energy sector rose 3.1%, helped by stronger crude prices, as top producers Saudi Arabia and the United Arab Emirates looked unlikely to raise output significantly, while Western governments agreed. explore ways to limit the price of Russian oil.

“Canadian markets are likely to hang on to this rally amid a spike in crude oil prices as we see more updates on the Russian supply ban from the G7 meeting,” said Kunal Sawhney, CEO of Kalkine. Group.

China cut quarantine time for incoming travelers in half in a major easing of one of the world’s tightest COVID-19 restrictions, which have deterred travel in and out of the country since 2020.

“The rally could also strengthen further as fears of a harsh rate hike ease somewhat and investors broaden their risk appetite, especially as we see COVID-19 restrictions ease in China and give gave way to some hopes of stronger growth,” Sawhney added. .

The financial sector gained 1.1%, while the industrial sector rose 0.2%.

The benchmark index has lost almost 9% so far this year on concerns about runaway inflation and recession fears, though it has outperformed its North American peers due to its exposure to commodities.

The materials sector, which includes base and precious metal miners and fertilizer companies, held steady despite higher copper prices as a weaker dollar bolstered hopes of stronger demand after China, the main consumer, will relax its COVID quarantine rules.

Stocks were broadly higher in morning trading on Wall Street on Tuesday, giving major indexes a solid boost to the upside after a shaky start to the week.

The S&P 500 rose 0.5%. The Dow Jones Industrial Average rose 199 points, or 0.6%, to 31,644 and the Nasdaq rose 0.1%.

Travel-related businesses were among the biggest gainers after China relaxed the quarantine requirement for people arriving from abroad, raising hopes that severe pandemic lockdowns may be beginning to ease.

United Airlines was up 6.3% and Wynn Resorts was up 8.8%.

Energy stocks also made solid gains as US crude oil prices rose 1.5%. Hess rose 5.4%.

Treasury yields rose. The yield on the 10-year Treasury note, which helps set mortgage rates, rose to 3.22% from 3.19% late Monday. Foreign markets also rose.

The easing of quarantine rules in China comes as investors face a pervasive list of concerns centering around rising inflation hitting businesses and consumers. Supply chain issues that have been at the root of rising inflation have worsened in recent months due to increased restrictions in China related to COVID-19.

Companies have been raising prices on everything from food to clothing. The Russian invasion of Ukraine in February put further pressure on consumers by raising energy prices and driving gasoline prices to record highs. Consumers were already shifting spending from goods to services as the economy recovered from the shock of the pandemic, but intensifying pressure from inflation has caused a more pronounced shift from discretionary items like electronics to necessities.

The business group The Conference Board reported on Tuesday that consumer confidence fell in June. The results were also much weaker than economists expected.

Widespread inflation has been behind a sea change in policy by central banks, which are raising rates to try to tame inflation after years of keeping rates low to help economic growth. Now, they are trying to slow economic growth, but investors are concerned they could go too far and push the economy into a recession, as key economic indicators already show a slowdown in things like retail sales.

Investors await comments expected in mid-week from central bank leaders, including Fed Chairman Jerome Powell and European Central Bank Chief Christine Lagarde. They’ll also get another update on US economic growth on Wednesday when the Commerce Department releases a report on first-quarter gross domestic product.

Wall Street is also bracing for the latest round of corporate earnings in the coming weeks, which will help paint a clearer picture of how companies are coping with pressure from rising costs and consumers cutting back on some spending.

Reuters and the Associated Press

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