Canada’s main stock index rose to record high at open on Monday, extending last week’s advance, with gains in the technology sector and positive sentiment on Wall Street supporting the upward movement.
At 9:30 a.m. ET, Toronto’s S&P/TSX composite index was up 0.6 per cent at 30,656.55 points.
The rally persisted despite disappointing domestic services PMI data, as technology stocks benefited from the ongoing enthusiasm surrounding AI that has buoyed markets throughout the past week.
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Wall Street’s main indexes opened higher on Monday, building on last week’s gains, as AMD’s chip-supply tie-up with OpenAI became the latest in a series of AI deals and offset concerns around a prolonged federal government shutdown.
The Dow Jones Industrial Average rose 17.8 points, or 0.04 per cent, at the open to 46,776.04. The S&P 500 rose 18.1 points, or 0.27 per cent, at the open to 6,733.86, while the Nasdaq Composite rose 113.8 points, or 0.50 per cent, to 22,894.352.
The equities rally has persisted despite cautious forecasts and warnings about elevated valuations, especially in tech, highlighting the extent of investor enthusiasm around AI.
“The dollar amounts around these partnerships and around the buildout of the infrastructure to support AI are getting to be really astounding,” said Leah Bennett, chief investment strategist at Concurrent Asset Management.
AMD (AMD-Q) was the latest catalyst as its OpenAI deal sent shares of the chip company up 34.1 per cent in early trading.
The gains came despite the government shutdown stretching into its sixth straight day.
While the standoff in Washington has delayed the release of the closely watched nonfarm payrolls report, a slew of alternative indicators last week pointed to tepid hiring, reinforcing expectations that the Federal Reserve will cut rates by 25 bps at its next meeting.
Goldman Sachs expects the military pay date on October 15 to pressure lawmakers into ending their deadlock. If the shutdown stretches beyond that date, roughly 1.3 million uniformed military personnel would go unpaid, the brokerage said.
However, even if a deal is reached, the timeline for releasing delayed data remains uncertain, increasing the likelihood that the Fed will be operating with limited visibility into the economy at its upcoming meeting.
Analysts say that makes the third-quarter earnings season kicking off next week the true test of the rally. By the end of October, 68 per cent of companies representing 72 per cent of market cap will have reported, according to Goldman.
“While the government shutdown is the focus now, earnings and the Fed will soon take centre stage. For as much noise as there is, these fundamentals are key catalysts for investors,” said Bret Kenwell, U.S. investment analyst at eToro.
Japan’s Nikkei stock index jumped nearly 5 per cent on Monday to a new record close while shares in France fell back nearly 2 per cent at midday after its prime minister resigned less than a month after taking office.
France’s new prime minister, Sebastien Lecornu, resigned just a day after he named his government, drawing a backlash across the political spectrum for his choice of ministers. French politics have been in disarray since President Emmanuel Macron called snap elections last year that produced a deeply fragmented legislature.
In Germany, the DAX rose 0.3 per cent while Britain’s FTSE 100 gained 0.2 per cent.
In Asia, Tokyo’s Nikkei 225 soared 4.8 per cent to 47,944.76, but the Japanese yen weakened after the ruling Liberal Democratic Party chose ultra-conservative lawmaker Sanae Takaichi as its leader and likely Japan’s first woman prime minister.
In intraday trading the Nikkei climbed as high as 48,150.04.
Takaichi, 64, was an ally of the late Prime Minister Shinzo Abe and is expected to carry on with his market-friendly policies since she backed his traditionalist vision for the country. She is almost certain to become prime minister because the LDP has the most seats in the lower house, although not a majority. It chooses the prime minister, and opposition groups are splintered.
The yen slipped against the U.S. dollar on expectations that Takaichi will boost spending, likely adding to inflationary pressures. The dollar rose to 150.31 Japanese yen from 149.33 yen. The euro slipped to $1.1674 from $1.1730.
Investors, especially non-Japanese ones, were pleased, said Neil Newman, head of strategy at Astris Advisory Japan.
“Obviously, investors like what she has been saying and certainly today judging by the number of stocks that moved and which stocks moved, it seems like pretty much led by foreigners so far,“ Newman said.
Defense-related shares got a big boost, given Takaichi’s hawkish stance. Stock in Kawasaki Heavy Industries leaped 9.2 per cent and Mitsubishi Heavy Industries soared 11.1 per cent.
Elsewhere in Asia, Hong Kong’s Hang Seng index sank 0.7 per cent to 26,957.77. Markets in mainland China were closed for a holiday. They reopen on Thursday.
Markets were also closed in Taiwan and South Korea, among other places.
In Australia, the S&P/ASX 200 shed 0.1 per cent to 8,981.40.
Markets in mainland China, Taiwan and South Korea were closed for holidays.
In energy trading, U.S. benchmark crude oil gained 51 US cents to US$61.39 per barrel. Brent crude, the international standard, added 59 US cents to US$65.12 per barrel.
A group of countries that are part of the OPEC+ alliance of oil-exporting countries agreed during the weekend to a small boost in oil production, citing a steady global economic outlook. That alleviated fears of an oversupply.
Reuters and The Associated Press
