Relative to the views of voting members of the Federal Reserve, the markets expect U.S. rates to stay lower for longer, and to rise more slowly.JONATHAN ERNST/Reuters
The Toronto stock market moved higher Tuesday amid general wariness over the outcome of this week's meeting of the U.S. Federal Reserve.
The S&P/TSX composite index rose 48.42 points to 15,530.98.
The loonie was up 0.62 of a cent to 91.12 cents (U.S.) as the latest data showed that Canadian manufacturing sales in July handily beat analysts' expectations.
Statistics Canada said sales rose 2.5 per cent to $53.7-billion in July, exceeding the previous record of $53.2-billion set in July 2008. Economists had expected a gain of one per cent, according to Thomson Reuters.
Wall Street had a weak start but by mid-day the Dow Jones industrials had surged 125.01 points to 17,156.15, the Nasdaq was up 33.32 points at 4,552.22, and the S&P 500 index gained 17.26 points to 2,001.39.
Markets will look to see if the statement released by the Fed on Wednesday following its two-day meeting contains any hints on when the central bank will raise interest rates and if this move will be sooner than mid-2015 as has been generally expected. Short-term rates have been near zero since the financial collapse of 2008-09.
For some time, the Fed has reassured markets that the rates will stay at this level for a "considerable time" after its asset purchase program end in October. Traders will look to see if the Fed drops the words "considerable time" in the announcement.
"All eyes are on the Fed," said Allison Mendes, a senior portfolio manager at Manulife Asset Management. "As you know, the decision is tied closely to data and we've had a string of good economic data and that is causing the market to evaluate the timing of the next Fed action."
Mendes said the writing is on the wall that interest rates will eventually go up, but many are still left wondering when the central bank will actually make that happen.
"You can't have interest rates low, sustainably, forever and interest rates hike are coming," she said Tuesday.
Overseas, there continues to be uncertainty over the outcome of the Sept. 18 independence referendum in Scotland. With just two days to go until the vote, anti-independence supporters argue that separation would cause economic uncertainty, while Yes supporters accuse the No side of scaring voters. Most think the outcome is too close to call at this point.
A Yes vote would result in huge complications from currency to membership in the European Union and NATO.
"Scotland is a small country, but that's going to have some economic and financial fallout and that just adds another layer of uncertainty in the markets," Mendes said. "As you know, investors don't like uncertainty."
In corporate news, an investment group that includes Wind Mobile founder Tony Lacavera and Canadian private equity firm West Face Capital has a tentative deal to buy out Wind's majority shareholder, VimpelCom Ltd., a Russian-Dutch company that has been trying to exit the Canadian market since it was blocked from gaining full ownership of the small wireless carrier last year. Financial terms of the deal were not released. The telecom sector on the TSX was down 0.50 per cent.
Meanwhile, Allergan and Pershing Square have agreed on a step toward settling a fight over the makeup of the Botox-maker's board. Allergan will hold its special shareholders meeting as planned on Dec. 18, while Pershing Square and its partner, Valeant Pharmaceuticals, continue their push for control of the California-based drug company. Valeant, based in Laval, Que., has made several offers to buy Allergan, the latest bid coming in at $53-billion (U.S.). Shares in Valeant dipped 0.51 per cent, or 69 cents, to $133.50 on the TSX.
On the commodity markets, the October crude contract on the New York Mercantile Exchange gained $2.15 to $95.07 a barrel. December gold bullion dipped $1.70 to $1,233.40 an ounce, while December copper was up a penny at $3.09 a pound.