TSX Ends Week Higher as Resource Shares Offset Tension
The TSX rose 0.2 percent Friday to end the week up 2.1 percent. Resource shares gained as investors weighed inflation risks and ongoing Middle East tensions.
The main stock index in Canada finished higher on Friday, as rising commodity prices provided a lift to resource-heavy sectors, helping to offset broader concerns regarding the ongoing conflict in the Middle East. The S&P/TSX Composite Index closed with a gain of 73.13 points, or 0.2%, ending the day at 31,960.65. For the week, the index rose 2.1%, marking a recovery after three consecutive weekly losses.
Geopolitical tensions continue to weigh on investor sentiment. While U.S. Secretary of State Marco Rubio suggested that the conflict in the Gulf might be resolved within weeks rather than months, market analysts expressed skepticism regarding the duration and its impact on global prices.
"I'm not sure anyone believes that this is going to be a short-term war. And if that's the case then inflationary pressures are going to be greater," said Michael Sprung, president at Sprung Investment Management.
The prospect of persistent inflation has shifted expectations for monetary policy. Investors are now anticipating three interest rate hikes from the Bank of Canada this year, whereas no changes were expected prior to the start of the conflict. This shift comes as the United States reported a drop in consumer sentiment to a three-month low, driven by fears that the war will further stoke inflation and cloud the economic outlook.
Energy shares were a primary driver of the market's upside, climbing 2.8% as oil prices settled 5.5% higher at $99.64 per barrel. The materials group, which includes major miners such as Barrick Gold Corporation, rose 3.4% as gold prices benefited from increased buying interest during market dips.
Despite the strength in resources, seven of the ten major sectors closed lower. Consumer discretionary stocks fell 1.9%, while the industrials and heavily weighted financials sectors both declined by 1.1%. On the trade front, Canadian officials are working to mitigate economic reliance on traditional partners. The minister of international trade stated that the government aims to finalize a free-trade agreement with the Mercosur bloc in South America by the autumn.
