TSX futures rise on commodity surge; economic data in focus

Canada’s main stock index, the S&P/TSX composite index, reached a record high in late morning trade on January 7, 2021. This positive momentum was supported by a rise in commodity prices. However, investors remained cautious ahead of the release of domestic GDP data and a key U.S. inflation report.

Futures for the S&P/TSX index were up 0.5% at 7:20 a.m. ET, indicating a positive start to the trading day. The benchmark index is expected to record its first quarterly decline in a year, and is on track for its worst month since May. Rising yields, sticky inflation, and ongoing economic uncertainty have dampened investor sentiment.

Energy and materials stocks will be closely watched as oil prices gained 2% for the week and most metals rose in early trade. These sectors have the potential to drive further gains for the Canadian stock index.

Investors are also awaiting the release of Canada’s GDP data, which is expected to show a slowdown in economic growth from 0.2% in June to 0.1% in July. This data will provide insights into the health of the Canadian economy and its recovery from the impact of the COVID-19 pandemic.

Additionally, the U.S. inflation report, specifically the personal consumption expenditures (PCE) price index, will be monitored. The PCE index is the U.S. central bank’s preferred inflation metric and is expected to show a 0.5% increase in August, compared to a 0.2% gain in July. This data will impact investor expectations regarding future monetary policy decisions by the U.S. Federal Reserve.

Market concerns about a potential U.S. government shutdown also remain. The Democratic-led Senate moved forward with a bipartisan stopgap while the House began voting on partisan Republican spending bills. The uncertainty surrounding this issue could have implications for investor sentiment.

In global markets, U.S. futures rose as Treasury yields eased from multi-year highs, leading to gains in megacap stocks. This positive sentiment could spill over to the Canadian market, further supporting the rise in the S&P/TSX composite index.

In terms of commodities, gold futures were up 0.4% at $1,877.3, while US crude oil was up 1.1% at $92.67 and Brent crude rose 0.9% to $96.23. These price movements indicate further support for the energy and materials sectors.

Overall, the Toronto Stock Exchange’s S&P/TSX composite index is showing strength and reaching new highs. While cautiousness remains in the market, positive economic data and a potential resolution to the U.S. government shutdown could drive further gains in the Canadian stock market.