Investor optimism pushes stock markets, oil and loonie to near three-month highs

Investor optimism pushes stock markets, oil and loonie to near three-month highs

TORONTO — Investor optimism about economic reopenings pushed North American stock markets, crude oil prices and the loonie to nearly three-month highs.

The S&P/TSX composite index closed up 158.15 points to 15,394.36, the strongest level since March 6. It’s 37.8 per cent off the March 23 low and just 14.3 per cent from February’s record high.

In New York, the Dow Jones industrial average was up 267.63 points at 25,742,65. The S&P 500 index was up 25.09 points at 3,080.82, while the Nasdaq composite was up 56.33 points at 9,608.38.

“Overall, markets are still climbing a wall of worry. There’s a lot of people that are just looking at the overall headlines and trying to figure out why it’s going up,” said Greg Taylor, chief investment officer of Purpose Investments.

He said markets are looking past the worst of the virus fears and anticipating a rebound as global markets start to reopen.

“So markets are well off the shock lows of March and they seem to be getting rid of some of the volatility that we had earlier in the year and seem to be on a positive tone for the foreseeable future,” he said in an interview.

Taylor said people are starting to get more confident in the recovery and that will support the rotation away from technology and gold towards energy, materials and financials.

“And from a TSX point of view, I think that’s going to be something that we could start to see the TSX start to outform some of the other markets as this takes hold because Toronto has really lagged some global markets.”

That’s because the Toronto market has less weight in health care and technology that led the U.S. bull market while banks and oil have underperformed.

Eight of the 11 major sectors on the TSX were higher led by energy.

It gained nearly 4.3 per cent as crude oil prices rose to its strongest level since March 6 on comments from OPEC about extending production cuts and growing confidence about the global economy.

The July crude contract was up US$1.37 or 3.9 per cent at US$36.81 per barrel and the July natural gas contract was up 0.3 of a cent at nearly US$1.78 per mmBTU.

“Canada is still looked at as a bit of a petro currency and a petro economy and and having a stronger oil price is definitely better for for the Canadian economy,” said Taylor.

Baytex Energy Corp. surged 34.1 per cent on the better oil environment, followed by Crescent Point Energy Corp. at 11.1 per cent and MEG Energy Corp. at 10.7 per cent.

“Those are companies that would have been hit the hardest because they really can’t make money in this as really low price environment. So they are the ones that are the most volatile.”

An 11.1 per cent gain by mall fast-food company MTY Food Group Inc. led consumer discretionary higher while the heavyweight financials sector gained 2.1 per cent with National Bank of Canada climbing 4.4 per cent.

Technology was helped by an 8.5 per cent increase in shares of Blackberry Inc. while SNC-Lavalin Inc. was up eight per cent to help industrials.

Materials was under pressure, losing 2.4 per cent on weaker gold prices, while health care and real estate dipped.

The August gold contract was down US$16.30 cents at US$1,734.00 an ounce and the July copper contract was up 2.05 cents at US$2.49 a pound.

The Canadian dollar traded for 73.99 cents US compared with 73.37 cents US on Monday on a devaluation of the U.S. dollar.

During the March selloff, investors sought safety in the U.S. dollar. But growing confidence is helping the Canadian and Australian currencies.

“I think of that just as another symptom of the risk-on nature of the market,” said Taylor. “Oil moving higher certainly does help the Canadian dollar but it just feels like it’s just part of that whole risk-on trade right now.”

This report by The Canadian Press was first published June 2, 2020.

Companies in this story: (TSX:NA, TSX:BTE, TSX:CPG, TSX:MEG, TSX:MTY, TSX:BB, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press

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