Trading on Canada's main stock market resumed Tuesday after a holiday weekend, and did so with investors in a buying mood in pushing the Toronto Stock Exchange up near 90 points, boosted by buying in the resources sectors, despite mixed commodity prices.
Among heavyweight sectors, Energy jumped 1.75% and Materials rose 1.5%. But gains were capped as the TSX Information Technology Index dropped 5.5%. In the US, Tech stocks weighed on the Nasdaq too, down 2.35%, while the S&P 500 lost about 0.8%.
It is likely that concerns about high inflation and uncertainty about the pace of rate hikes in North America also helped cap gains today, just as they have on many other occasions over recent weeks.
But another factor in the background could be China, as cited by Wells Fargo Investment Institute (WFII). According to WFII, China's economic slowdown is setting the tone for Asia. It noted the government has locked down major cities, like Shanghai, as part of its COVID-zero policy, and as a result, industrial output and retail sales have fallen the past two months while the unemployment rate increased to 6.1% in April. Factory shutdowns have put additional pressure on already existing global supply-chain disruptions, it said.
WFII cited a chart showing both services and manufacturing industries in China have been in contraction territory since March, the weakest levels recorded since the early days of the pandemic in early 2020. And on what it may mean for investors, WFII believes China's government lockdown is likely to weigh on aggregate emerging market economic growth, while also aggravating supply-chain disruptions and inflation around the globe.
Of commodities today, gold rose to the highest in two weeks on safe haven buying amid falling stock markets while the dollar and bond yields weakened. Gold for August delivery closed up $17.50 to US$1,871.40 per ounce, the highest since May 6.
But West Texas Intermediate oil closed lower amid tight supply ahead of the Memorial Day holiday while China's quarantine of Shanghai and other areas continues to suppress demand for the world's No.1 importer. WTI crude for July delivery closed down $0.52 to US$109.77 per barrel, Marketwatch reported. July Brent crude, the global benchmark, was last seen up $0.40 to US$113.82 while Western Canada Select was down $1.66 to US$93.99 per barrel.