S&P/TSX composite higher after inflation report

TORONTO — Canada’s main stock index eked out a gain Tuesday after a new report on inflation surprised to the downside, while U.S. markets rose ahead of today’s interest rate announcement.

The S&P/TSX composite index was up 23.40 points at 21,860.58.

In New York, the Dow Jones industrial average was up 320.33 points at 39,110.76. The S&P 500 index was up 29.09 points at 5,178.51, while the Nasdaq composite was up 63.34 points at 16,166.79.

Inflation dipped to 2.8 per cent in February, according to Statistics Canada, with major contributors to the downward shift including cellular and internet services, and groceries. The decrease came despite a year-over-year increase in gas prices.

The results surprised to the downside, said Brianne Gardner, senior wealth manager of Velocity Investment Partners at Raymond James Ltd.

“That does kind of open the door a little bit more for the Bank of Canada to cut rates this year,” she said.

“We do expect Canada to be making rate cuts ahead of the U.S., because we are a more sensitive country to interest rates.”

Tuesday’s inflation data bolsters expectations for cuts to begin in June, with some even betting on April, said Gardner.

“I think that the Bank of Canada will be happy to see this data today.”

Meanwhile in the U.S., markets rose ahead of today’s interest rate announcement by the U.S. Federal Reserve.

The central bank is expected to keep its key rate steady, said Gardner.

Last week’s inflation data was hotter than expected, in contrast to Canada’s report.

“But I still don’t think that changed the narrative of how inflation has eased significantly over the last 12 to 24 months,” said Gardner.

Investors will be looking for any comments or projections from the Fed regarding rate cuts. The central bank previously signalled it could cut three times this year, and market expectations, while previously much higher, are more or less in line with that now.

The Fed could reduce its projection, noted Gardner, as the central bank continues to be data-dependent in its approach, though she added that many believe inflation has already fallen enough to warrant rate cuts.

On the global stage, Japan’s central bank raised its interest rate back to at least zero in a historic move.

The Canadian dollar traded for 73.63 cents US compared with 73.85 cents US on Monday.

The May crude oil contract was up 57 cents at $82.73 US per barrel and the April natural gas contract was up four cents at $1.74 US per mmBTU.

The April gold contract was down $4.60 US at $2,159.70 US an ounce and the May copper contract was down six cents at $4.07 USa pound.