The TSX Composite Index continued its strong bull run last week despite major headwinds. It rose by 0.55%, even as relations between the US and Canada escalated and gold prices pulled back. This article looks at the top catalysts for the TSX Index this week.
TSX Composite Index faced major headwinds
The TSX Index, which track the biggest Canadian companies, has been in a strong bull run in the past few years. It has jumped by over 170% from its lowest level during the pandemic.
The index has faced some major headwinds in the past few days. One of them is that Trump ended all trade talks with Canada, meaning that goods worth billions of dollars may be impacted.
The TSX Index also jumped as gold price, which has pulled back in the past few days. Gold’s surge has helped to boost some of the biggest gold mining stocks in Canada.
Additionally, the index faced a major challenge as Canada’s inflation data came out higher than expected. A report by Statistics Canada showed that the headline Consumer Price Index (CPI) jumped to 2.4% in September, from the previous 1.9%. It has continued rising after bottoming at 1.7% in July.
Bank of Canada to impact stocks
The main catalyst for the TSX Composite Index will come out on Wednesday when the Bank of Canada delivers its interest rate decision.
Economists expect the bank to cut interest rates by 0.25% even after inflation jumped and the labor market remained solid. It added over 60,000 in September. In a note, analysts at ING said:
“Tariff-related risks remain elevated, and allowing markets to price in further dovishness could help loosen financial conditions and weaken the Canadian dollar – a positive for exports.”
An interest rate cut will be bullish for the TSX Composite Index as it will lower the bond yields and make stocks more attractive. Canada’s 10-year yield has dropped to 3.08% from this month’s high of 3.57% and the year-to-date high of 4.29%.
Canada company earnings
The other top catalyst for the TSX Composite Index is corporate earnings from some of its top constituents. Agnico Eagle Mines, which has a market cap of over $93 billion will publish its earning on Wednesday.
These numbers come as the Agnico Eagle Mines stock price has jumped by over 416% from its lowest point in 2022. This jump has made it one of the best-perfoming companies in Canada. Recently, however, it has pulled back by 12% as gold prices have pulled back.
The other top TSX Index companies that will publish their results on Wednesday are Alamos Gold, Ivanhoe Mines, Air Canada, and Gildan Activewear.
Companies like Canadian Natural Resources, Fairax Financial, Restaurant Brands, Canadian National Railway, Imperial Oil, and Telus will also publish their results this week.
Federal Reserve interest rate decision
The other major catalyst for the TSX Composite Index is the upcoming Federal Reserve interest rate decision, which will come out on Wednesday.
Economists expect the bank to cut interest rates by 0.25%, bringing the benchmark lending rate to between 3.75% and 4%.
A Fed cut may boost Canadian stocks, especially if their American counterparts continue soaring. It may also benefit the commodity market, which has an exposure to Canadian stocks.
Looking ahead, the next catalysts for the TSX Composite Index are the upcoming Donald Trump-Xi Jinping meeting and US earning dump.
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