TORONTO — Canada's main stock index closed just shy of a three-week high Friday after the heavyweight financials sector was bolstered by a positive housing report.
Volume was light across North American markets as investors awaited two big events in the coming weeks — next week's Federal Reserve decision about interest rates and a meeting between the U.S. and Chinese presidents to discuss trade at the G20 summit the following week.
It's not atypical for markets to wait to see results from meetings of this importance, says Macan Nia, senior investment strategist at Manulife Investments.
"I don't think that any traders or short-term investors are likely to put a big bet on until you get some clarity from next weeks' meeting out of the Fed and then obviously the G20 what kind of rhetoric comes out of that meeting between the U.S. and China," he said in an interview.
Investors are expecting the U.S. central bank to cut interest rates, but everyone will be watching for signals about its assessment of the slowing economy.
"In our opinion that has a very strong ability to move markets and also from that consistency and stability one thing that has been overhanging markets is trade disputes," he said.
Nia said the Federal Reserve's decision about rate cuts could go either way between one and three cuts depending on how it reads data, including softer employment numbers and retail sales Friday that indicated the U.S. economy continues to chug along.
He said the market could be disappointed by just one cut.
"It's really a Goldilocks economy in the U.S. where it's not too hot and not too cold so we're all, as market participants, looking to the Fed and what they have to say in terms of gauging what to expect from them over the next couple of months."
The S&P/TSX composite index gained 62.65 points to 16,301.91, the highest closing since May 27.
Seven of the 11 major sector climbed, led by industrials, financials and materials.
Industrials was helped by CAE Inc. shares rising 2.4 per cent and financials led by Toronto-Dominion Bank.
Earlier, the Canadian Real Estate Association upgraded its forecast for 2019 home sales to an increase of 1.2 per cent, compared with its previous forecast of a decline of 1.6 per cent this year. The updated outlook came as CREA reported home sales in May were up 6.7 per cent compared with a year ago, the largest year-over-year increase since 2016.
Materials continued to be helped by rising gold prices with the August gold contract up 80 cents at US$1,344.50 an ounce while the July copper contract was down 2.7 cents at US$2.63 a pound.
The energy sector was one of the three biggest losers on the day even though crude prices inched higher on geopolitical uncertainties in the Middle East following the targeting of two tankers near the strategic Strait of Hormuz. Iran denied the U.S. accusation that it had a role in the apparent attacks.
The July crude contract was up 23 cents at US$52.51 per barrel and the July natural gas contract was up 6.2 cents at US$2.39 per mmBTU.
While geopolitical conflicts tend to increase crude prices, fundamentals of a weakening global economy are not positive for prices longer term, said Nia.
The Canadian dollar traded for an average of 74.71 cents US compared with an average of 75.05 cents US on Thursday.
In New York, the Dow Jones industrial average was down 17.16 points at 26,089.61. The S&P 500 index was down 4.66 points at 2,886.98, while the Nasdaq composite was down 40.47 points at 7,796.66.
U.S. markets were hurt by a more than 17-year low in Chinese industrial output, another signal the world's second-largest economy is feeling the effects of the trade dispute with the United States.
Nasdaq was particularly affected as chipmakers took a hit after Broadcom lowered its revenue guidance for the rest of the year due to trade tensions and a "broad-based" slowdown in general.
Companies in this story: (TSX:CAE, TSX:TD, TSX:GSPTSE, TSX:CADUSD=X)