TSX Posts Modest Gain On Return From Easter Holiday

Many Canada stock pickers appeared to be overcoming a sugar rush on their return to trading on this Easter Monday after a long holiday weekend in the way they sent Canada's main stock market up and down regularly from the opening bell and through the day, before finally having it settle up near 20 points. Modest gains for sure today, but they do keep the Toronto Stock Exchange (TSX) just shy of record high levels.

According to BNN Bloomberg TV, the TSX recorded its fourth largest ever closing level.

Gains on the resources heavy TSX likely reflected higher commodity prices, and were made despite news that another high profile tech stock is leaving the index, to go private.

Nuvei NVEI on Monday said it entered into a definitive arrangement agreement to be taken private by Advent International, with the support of each of the company's holders of multiple voting shares, being Philip Fayer, certain investment funds managed by Novacap Management and Caisse de depot ET placement du Quebec, in an all-cash transaction which values the electronic-payments company at about US$6.3 billion. Nuvei is set to become the latest in a good number of Canadian software companies to go private, and this comes as Light speed Commerce Inc. founder Dax Dasilva LSPD has reportedly been thinking about whether or not his business should do the same.

Still, while the Info Tech sector didn't rise as much as Battery Metals, Energy and Base Metals on this Monday, it did make modest gains. Meanwhile, Health Care was the biggest loser, down 1.2%.

Of commodities today, West Texas Intermediate crude oil closed higher on positive demand signals from China and tight supply. WTI crude for May delivery closed up $0.54 to settle at US$83.71 per barrel, while June Brent crude, the global benchmark, was last seen up $0.52 to US$87.52.

Also, gold rose to fresh record high, climbing for a fifth-straight session as buying momentum continues after a key US inflation measure rose less than expected in February, raising expectations the Federal Reserve will lower interest rates this year. Gold for June delivery closed up US$18.70 to settle at US$2,257.10 per ounce.

On the economic front today, focus was on the release of the Bank of Canada Business Outlook Survey and Canadian Survey of Consumer Expectations (2024 Q1).

For RBC Economics, the bottom line is that details from today's surveys "flagged a slight rebound in what's still considered very soft business sentiment and Consumer demand backdrop." RBC noted capacity constraints have continued to ease, alleviating cost pressures for businesses while leading to further normalization of their pricing practices. It also noted wage gain expectations among businesses were still relatively elevated, but should continue to moderate following weakening in labour market conditions (unemployment rate in Canada has risen by 0.7% over the past year).

"Overall," RBC added, "we continue to expect both inflation and wage growth to keep trending lower persistently in the year ahead and for that to allow for the Bank of Canada to start moving the overnight rate lower in June."

Separately, Royce Mendes over at Desjardins noted a "vast" number of Canadian businesses filed for insolvency for a second consecutive month in February. According to Mendes, there haven't been this many firms filing for insolvency over a two-moth period since the mid-2000s. He noted the struggles showed up across a number of industries, although accommodation and food services once again topped the list.

The construction, retail and transportation and warehousing sectors also saw an elevated number of firms "throwing in the towel." Against this backdrop, Mendes said, it's hard to ignore the fact that Canada Emergency Business Account (CEBA) loans, which supported these industries, were due to be repaid in mid-January.

Mendes noted a majority of businesses filing for insolvency were located in Quebec, but added "that always seems to be the case."

For now, Mendes noted, consumer insolvencies are just back to their pre-COVID average. But he said household financial stress is already historically high according to some research. As a result, he added, even a modest increase in the jobless rate could cause problems.

"While business sentiment ticked up in the Bank of Canada's latest surveys, central bankers will no doubt be keeping a close eye on the fallout from these insolvencies, so as not to leave interest rates unchanged for too long."