North American stock markets gained ground on Wednesday, thanks to continued optimism about the strength of the United States economy.
The S&P/TSX Composite Index rose 152.39 points to 24,224.90.
In New York, the Dow Jones industrial average rose 431.63 points to 42,512.00. The S&P 500 index gained 40.91 points to 5,792.04, while the NASDAQ Composite Index rose 108.70 points to 18,291.62.
The gains on Wall Street and Bay Street contrast with the situation in China, where stock markets have fallen in the past two days on investor concerns that the Chinese government has not done enough to stimulate the flagging economy. of the country.
Shanghai stocks fell 6.6% on Wednesday, posting their worst loss since February 2020, as fears of a virus emanating from Wuhan and other Chinese cities grew. In Hong Kong, the Hang Seng Index slipped 1.4% after falling more than 9% the day before, marking its worst loss since the 2008 global financial crisis.
Concerns about the health of China’s economy sent commodities lower on Wednesday. Gold was in decline and oil continued to fall after international benchmark Brent briefly rose above US$81 a barrel earlier this week on concerns that escalating tensions in the Middle East could disrupt the oil supply.
But while the prospect of weaker Chinese demand has had a negative impact on commodities, North American markets continue to be boosted by news from the United States, where a series of recent reports have shown that the US economy remains stronger than expected.
John Zechner, president of J. Zechner Associates, described market sentiment south of the border as “euphoric” — even in the face of threats like conflict in the Middle East.
“Surprisingly, compared to what I have observed in the past, geopolitics seems to have less impact on markets than before,” Zechner said. These factors really seem to take a back seat to the U.S. economy. »
As a stronger-than-expected U.S. economy has forced investors to lower their expectations for the extent of the U.S. Federal Reserve’s interest rate cut at its next meeting in November, markets are anticipating now a 25 basis point cut, instead of another 50 basis point cut.
Economic strength also increases the likelihood of strong third-quarter profits for large U.S. companies.
Mr. Zechner stressed that if third-quarter results show strong profit growth, it will increase investor optimism for a “soft landing,” a situation where inflation slows without tipping the economy into recession.
“We know that big tech companies will probably do well for now, as long as they continue to build big AI infrastructure,” he said.
“What we want to see is the rest of the economy and what’s happening there. You know, the railway companies, the financial companies, the industrial companies, the big consumer companies, the automobile companies – that will be the big test,” he added.
In Canada, the energy and mining sectors closed slightly in the green, despite falling commodity prices.
Lumber stocks rose as hurricane Milton was preparing to make landfall in Florida, leading to speculation that lumber will be in demand during the post-storm rebuilding period. Interfor gained 5.07% during the session, while West Fraser Timber closed 4.65% higher.
The Canadian dollar traded at 73.05 US cents compared to 73.22 US cents on Tuesday.
On the New York Mercantile Exchange, the price of crude oil fell 33 cents to US$73.24 per barrel and that of natural gas fell eight cents to US$2.66 per million BTU.
Gold was down US$9.40 at US$2,626.00 an ounce and copper was down four cents at US$4.40 a pound.
Zechner said he would closely monitor the release of the next U.S. inflation report, scheduled for Thursday. But in the meantime, he added, the U.S. economy continues to build momentum.
“She seems to be in the zone where everything is going well,” he said.
With information from the Associated Press