Canadian Stocks Rise Sharply As Powell's Speech Reinforces Rate Cut Bets

(RTTNews) - Canadian stocks posted sharp gains on Wednesday, extending yesterday's surge, amid positive hints of another rate cut from yesterday's speech by U.S. Fed Chair Jerome Powell as investors assessed the implications of escalating U.S.-China trade friction.

After opening above yesterday's close, the benchmark S&P/TSX Composite Index traded firmly positive throughout the session to finally close at 30,637.12, up by 283.51 points (or 0.93%).

Nine of the 11 sectors posted gains today with Materials sector leading the pack.

Yesterday, U.S. Federal Reserve Chair Jerome Powell addressed the National Association of Business Economics in Philadelphia.

In his speech, Powell underscored the worrisome slowdown in hiring that poses a growing risk to the U.S. economy and acknowledged that the rising downside risks to employment have shifted the Fed's assessment of the balance of risks.

Speaking on tariffs, Powell stressed that there is a risk that the slow pass-through of tariffs starts to look like persistent inflation.

Powell's remarks set the tone for additional interest rate cut expectations.

Meanwhile, renewed trade tensions between the U.S. and China have escalated to the next level, with both sides charging special port fees on each other's vessels entering their ports. The scheduled meeting between leaders of both nations in South Korea this month hangs in the balance with no official confirmation from both sides.

In the U.S., the government shutdown entered day number 15.

With no signal of a resolution to the impasse visible, traders are concerned about the spillover effect of the government closure on other markets.

Canada has been hit with 35% tariffs on a majority of its exports to the U.S. On September 29, Trump announced an additional 10% tariffs on Canadian lumber. From today, Canadian softwood lumber exports to the U.S. face tariffs above 45%.

Canadian Prime Minister Mark Carney returned with no breakthrough announcements on tariff reduction after last week's meeting with U.S. President Donald Trump in Washington. No details on the Canada-United States-Mexico Agreement which is up for re-negotiation next year were shared.

Data released by Statistics Canada today revealed that Canada's month-on-month manufacturing sales fell 1.0% to C$69.4 billion in August after a 2.5% jump in July, performing slightly better than market expectations of a 1.5% decline.

Canada's month-on-month wholesale trade declined 1.2% month-on-month to C$85.4 billion in August, the first contraction in four months, reversing a 1.2% gain in July but beating estimates of a 1.3% drop.

Last week's jobs data revealed that the unemployment rate held steady at 7.1% in September as the economy added around 60,000 jobs in the month. The gains were concentrated in full-time work with 106,000 positions added in September.

The unexpected hiring surge dampened expectations for another interest rate cut by the BoC this month.

The central bank cut its policy rate by 25-basis-point to 2.5% last month as it stated that the balance of risks in the economy was shifting away from higher prices towards weaker growth.

The upcoming inflation report to be released on October 21 and the BoC's quarterly surveys the day before will have the final say on whether the Bank of Canada delivers additional rate cuts.

According to a survey by auditing firm KPMG Canada, more than 9 in 10 Canadian business leaders are hoping for broader support and tax relief in the upcoming federal budget, slated to be tabled on November 4. Eighty percent of them acknowledged that their businesses are struggling due to the U.S. tariffs.

Major sectors that gained in today's trading were Materials (3.23%), IT (2.03%), Utilities (0.85%), Healthcare (0.77%), and Consumer Discretionary (0.43%).

Among the individual stocks, Aya Gold and Silver Inc (13.89%), Endeavour Silver Corp (9.17%), Discovery Silver Corp (8.69%), Bitfarms Ltd (10.17%), and Celestica Inc Sv (9.02%) were the prominent gainers.

Energy (0.17%) and Communication Services (0.63%) were the only two major sectors that lost in today's trading.

Among the individual stocks, Imperial Oil (2.16%), Athabasca Oil Corp (2.14%), International Petroleum Corp (1.50%), and Quebecor Inc (5.15%).