The TSX starts the final quarter strong on the back of the energy boom

Posted On: October 4, 2022

Gains in energy stocks helped Canada’s main stock index get the final quarter of the year off to a good start as investors tried to weather fears of a global recession sparked by aggressive government moves to curb inflation.

As of 9:52 a.m. ET (1:52 GMT) Monday, the Toronto Stock Exchange’s S&P/TSX Composite Index was up 249.71 points, or 1.35%, to 18,693.93. The composite S&P/TSX index lost 2% last quarter and is down 11.8% year-to-date.

“As sentiment remains extremely bearish, the fourth quarter could bring an unexpected upside surprise for investors,” said Brandon Michael, principal analyst at ABC Funds Toronto.

“Seasonally, we are entering a very constructive time that starts in October and lasts into spring. I think the glass is half full.”

According to data from Refinitiv, the TSX gained nearly 5% in October of last year and nearly 6% in the final quarter of last year.

The energy sector boosted the main index, rising 4.8% as crude prices rose by more than $4 a barrel on hopes of an OPEC+ production cut. Oil is one of Canada’s most important exports.

The materials sector, which includes precious and base metals miners and fertilizer companies, was also up 1.7%. Together, the energy and material groups make up 29% of the TSX weighting.

The financial sector gained 0.5%, while the industrial sector gained 0.6%.

Meanwhile, data showed that Canadian manufacturing activity contracted for the second straight month in August, amid rising borrowing costs and uncertainty over the economic outlook.

The Bank of Canada (BoC) has hiked interest rates by 300 basis points since March to a 14-year high of 3.25% and is expected to hike rates further, with traders hyping the likelihood of another 50 basis point hike later at 59, 5% rate month to fight inflation.

Saputo Inc fell 4.3%, the biggest drop on the TSX, after Scotiabank downgraded the Canadian dairy company’s stock to outperforming the sector.

On the TSX, 206 issues were up while 28 issues fell at a 7.36-to-1 ratio in favor of winners, with 29.11 million shares traded.

The TSX posted no new 52-week highs and five new lows.

All Canadian orders recorded three new 52-week highs and 36 new lows for a total volume of 48.08 million shares. (Reporting by Shashwat Chauhan; Editing by Uttaresh.V and Anil D’Silva)