TORONTO – The Toronto stock market racked up a small gain Tuesday as commodities mostly fell despite continuing uncertainty in Iraq, while south of the border the U.S. Federal Reserve began a two-day policy meeting.
The S&P/TSX composite index added 15.46 points to 15,055.89. The Canadian dollar dipped 0.19 of a cent to 92.05 cents US.
Traders were cautious as they awaited the outcome of the Fed meeting and its latest economic outlook, due for release Wednesday.
The meeting is taking place amid news from the U.S. Labor Department that American consumer prices rose 0.4 per cent in May, the biggest one-month jump since February 2013, pushed up by the rising cost of food and gasoline and the biggest hike in airline fares in 15 years.
The U.S. central bank is expected to cut its monthly bond purchases by $10 billion to US$35 billion a month but traders will be looking for clues as to the Fed’s intentions on tapering going forward. The stimulus has helped keep long-term borrowing rates low and supported equity markets.
Gareth Watson, vice-president of investment management and research at Richardson GMP Ltd., says there shouldn’t be any big surprises from the central bank.
“Ever since they started tapering we haven’t really had any surprises out of them. We’ll be looking at the language of the release and pay attention to the press conference,” he said. “But they’ve been pretty predictable.”
Wall Street was higher, with the Dow Jones industrials up 27.48 points to 16,808.49, the Nasdaq 16.12 points higher at 4,337.23 and the S&P 500 index ahead 4.21 points at 1,941.99.
Meanwhile, after markets closed, Ottawa gave the green light to Enbridge Inc.’s proposed Northern Gateway pipeline, contingent upon the pipeline company satisfying all 209 conditions imposed in December by a joint review panel of the National Energy Board and Canadian Environmental Assessment Agency.
The $7-billion, 1,200-kilometre pipeline would link crude from the Alberta oilsands to a terminal in Kitimat on the British Columbia coast for shipment overseas. It faces stiff opposition from many First Nations and environmentalists.
Shares in Enbridge (TSX:ENB) closed up 45 cents at $51.96 on Tuesday.
Commodity prices were mostly lower after enjoying a bump last week as a result of the deteriorating military situation in Iraq.
About 300 U.S. soldiers are being moved into position to protect the U.S. Embassy and other American interests as President Barack Obama weighs options for dealing with the al-Qaida inspired militants who have captured a vast swath of the country’s north. Iraq’s crude oil exports have so far not been disrupted, but the conflict had raised concern about whether the country can rebuild its oil infrastructure and meet global demand.
The July crude contract on the New York Mercantile Exchange declined 54 cents to US$106.36 a barrel.
Watson said if the situation in Iraq continues, it may give the Toronto Stock Exchange more support to surpass its record high close of 15,073 set back in June 2008. The TSX has recently been trading near that level, with intraday highs going beyond it.
But if the current oil price is any indication, traders are now in a “wait and see” mode with oil, he said.
“That initial risk premium has been put into oil prices,” said Watson. “I don’t think traders are willing to push that premium too high until we see further advances by this insurgency.”
Investors did not flock to gold either, which is usually seen as safe haven amid geopolitical uncertainty. August bullion was down $3.30 to US$1,272 an ounce, while July copper was up a penny at US$3.06 a pound.
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