Gold stocks lift the S&P/TSX composite slightly higher amid geopolitical risks

Canada’s main stock index finished in positive territory on Monday as mining companies made gains and investors digested fresh inflation data.   

Ian Chong, portfolio manager for First Avenue Investment Counsel Inc., said investors experienced a muted trading day due to U.S. stock markets being closed for Martin Luther King Jr. Day.

“The strength in the TSX is largely driven by gold. Clearly, there’s a lot of noise out there in terms of geopolitical risks,” he said. 

The February gold contract was up US$81.30 at US$4,676.70 an ounce.

Statistics Canada said the federal government’s tax holiday a year ago pushed the annual pace of inflation up two ticks in December to 2.4 per cent, since prices last month were being compared with atypical ones during the GST break. A poll of economists heading into Monday’s data release had expected the annual inflation rate would hold steady at 2.2 per cent.

“I don’t think (the inflation reading) really moves the needle with anything. I think it’s still relatively subdued,” Chong said. 

Meanwhile, a new report by the Bank of Canada suggests business sentiment is subdued, but it remains up from its low seen in the second quarter of last year.

“In terms of sentiment, I think our government’s doing the right thing. They’re trying to stimulate the economy through fiscal policy, with large projects, new trade agreements with new partners and re-establishing communication with China, which is a huge opportunity there,” Chong said. 

The S&P/TSX composite index was up 50.41 points at 33,090.96.    

U.S. stock futures skidded on Monday morning after U.S. President Donald Trump threatened to place a 10 per cent extra tariff on imports from eight European countries because they oppose having America take control of Greenland.

“We should keep in mind that he’s always looking for the art of the deal, he comes out strong, shows you the stick, and he scales back and shows you the carrot,” Chong said.

Chong said that if declines in the U.S. futures market hold, it could lead to weakness in some of the major U.S. indexes when markets reopen Tuesday morning. 

“That could translate into a weak Canadian market as well ... we are still each other’s largest trading partner,” he said. 

Chong said he is optimistic that the latest bout of trade tensions will blow over, noting U.S. midterm elections are coming up and Trump’s gauge of success is typically the equity markets. 

The Canadian dollar traded for 72.10 cents US compared with 71.88 cents US on Friday.

The March crude oil contract was up nine cents US at US$59.43 per barrel.  

Daniel Johnson, The Canadian Press. With files from The Associated Press