Still underweight equities, don't think bottom is in: UBS' Luke Kawa
North American markets jumped on Wednesday as the latest U.S. inflation data led investors to scale back their interest rate hike wagers on both sides of the border.
The S&P/TSX Composite Index closed 307.64 points higher, or 1.57 per cent, to 19,885.94 in a broad-based rally.
In New York, the S&P 500 gained 2.13 per cent, the Dow rose 1.63 per cent and the Nasdaq closed with a 2.89 per cent gain. Bloomberg News reported the Nasdaq Composite Index is now up 20 per cent from its June lows.
U.S. inflation cooled to 8.5 per cent in July -- more than Wall Street expected. Investors took it as a sign that inflation in North America might have peaked and traders scaled back their expectations for interest rate hikes in Canada and the U.S.
Market data showed the implied odds that the Bank of Canada increases rates by three-quarters of a point at its next meeting were 45 per cent by mid-day Wednesday, down from 60 per cent odds earlier in the morning.
“Inflation appears to have peaked, knock on wood, this time,” said Luke Kawa, asset allocation strategist at UBS Investment Solutions, in an interview Wednesday.
“We don't necessarily want to declare victory yet. Good thing that inflation is heading down. This is still, you know, a fairly treacherous environment with a lot of elements of stickiness in the inflation picture going forward.”
Shares of Centerra Gold Inc. traded against the grain Wednesday, dropping 21.63 per cent to $6.27, after reporting disappointing financial results. The company was the worst-performing stock on the TSX.
CAE Inc. also saw its shares tumble as it missed fiscal first-quarter profit estimates and cut its full-year growth forecast.
The aviation company said its defence unit suffered setbacks from “unfavourable contract profit adjustments” from two U.S. programs, which led that division to an operating loss in the quarter.
CAE shares plunged 17.62 per cent to $27.39.
Afterhours, Walt Disney Co. beat revenue and profit expectations in its third quarter as visitors flocked back to its theme parks.
Its streaming service, Disney+, also saw its subscriber base grow to 152.1 million, which was more than analysts anticipated. The company said it’s planning to hike the price of Disney+ by $3 a month in the U.S., a 38 per cent increase. No new pricing was announced for Canadian customers.
West Texas Intermediate rose US$1.43 on Wednesday to settle at US$91.93 per barrel.
The Canadian dollar jumped roughly six-tenths of a cent to 78.26 cents U.S.