Canadian stocks reverse course to trade higher as oil falls, Macklem in focus

Canadian stocks experienced a reversal on Monday, trading higher and marking a departure from a nearly flat opening. This improvement was attributed to gains in global equities, which surpassed the decline in energy shares. Investors were also closely watching remarks from Bank of Canada Governor Tiff Macklem to gain insight into potential future interest rate movements.

The S&P/TSX Composite climbed 56.75 points, or 0.16%, to reach 35,863.40, after opening almost unchanged at 35,795.38 following a 0.2% drop on Friday. Despite a significant decrease in oil prices, which pressured Canada's energy-centric market, the market managed to recover. Brent crude futures experienced a 2.5% decline, settling at $101.24 a barrel, following a temporary surge around $110 last week.

Macklem is scheduled to deliver his speech later on Monday, with traders anticipating a 60% probability of an interest rate increase during the Bank of Canada's October meeting. Additionally, investors are eagerly awaiting Canadian retail sales data later in the week to evaluate the impact of higher prices on consumer spending. The TSX rebounded last week, ending a four-week losing streak, as investors weighed the outlook for interest rates, commodities, and the Canadian economy.

U.S. stocks also opened higher on Monday due to falling oil prices, with investors seemingly resuming their interest in equities after a mixed performance for Wall Street the previous week. The Dow Jones Industrial Average increased by 0.4% to 51,880.55 points, while the S&P 500 rose by 0.5% to 7,690.88 points, and the NASDAQ Composite climbed by 0.8% to 26,723.77 points.

At the beginning of the trading day, the S&P 500 had climbed by 0.5% to 7,690.88 points, the tech-heavy NASDAQ Composite had risen by 0.8% to 26,723.77 points, and the blue-chip Dow Jones Industrial Average had increased by 0.4% to 51,880.55 points. Over the past five days, the main averages had faced mixed outcomes, as traders analyzed the impact of the Federal Reserve's first interest rate hike in over three years, growing concerns over artificial intelligence safety, and fluctuations in oil prices driven by supply disruptions.

Analysts from Vital Knowledge noted that stocks opened the week on a positive note, with robust gains in Asia, Europe, and the U.S. futures markets. Separately, clashes between Iran-backed Houthi militants and Saudi-aligned forces in Yemen escalated over the weekend as both sides vied for control of crucial shipping lanes. Battles took place in the mountainous region of southwest Yemen, according to The New York Times, citing a Saudi army officer.

The ongoing conflict, which began in late February, remains unresolved, and the U.S. and Iran exchanged fresh threats, with President Donald Trump vowing to eliminate Iranian leadership if Tehran fails to negotiate, while Iran's military pledged retaliation against any renewed attacks. Despite the potential for ongoing supply disruptions due to the conflict, oil prices declined, with Kpler data revealing that Saudi oil exports surged to around 4 million barrels per day in September, up from 2.4 million bpd in August.

Riyadh aims to resume oil flows through its damaged east-west pipeline promptly, although analysts have expressed doubts about achieving this goal. Meanwhile, the head of U.S. Central Command reported that the quantity of crude oil, cargo, and liquefied natural gas transported over the past two weeks had surpassed any level observed in the previous six months, according to Reuters.

In response, Brent crude futures dropped by 2.5% to $101.24 a barrel, having previously hovered around $110 a barrel. The decline in oil prices helped to alleviate some concerns about a global tightening cycle following interest rate hikes by the Federal Reserve and Bank of Japan the previous week. Global bonds, which had been under pressure in recent days, saw a rally.

Additionally, spot gold prices fell by 0.3% to $4,365.40 an ounce, and gold futures dropped by 0.5% to $4,404.12 an ounce, as a stronger dollar diminished gold's appeal to overseas buyers.