TORONTO – North American stock markets partially rebounded from Wednesday’s correction on a broad-based rally despite crude oil prices hitting their lowest level in about five months.
The climb began in the morning after European Central Bank president Christine Lagarde said financial institutions had agreed to add stimulus measures to tackle the impact of increasing COVID-19 infections, said Erik Bregar, head of currency strategy at the Exchange Bank of Canada.
“He showed clearly that more stimulus is coming in Europe in December and everything has been moving up since then,” he said in an interview.
Riskier currencies and European bonds responded, suggesting that more quantitative easing or a cut in deposit rates could occur in December, Bregar said.
“When you see the global market catching something positive, it raises everything,” he said. referring to the reaction in North America.
The energy sector fell on the TSX as crude oil futures slumped below US $ 37 per barrel to their lowest closing price since early June. Crescent Point Energy Corp. took the lead with a 5.7 percent drop.
The December crude oil contract fell US $ 1.22 to US $ 36.17 per barrel and the December natural gas contract rose one cent to US $ 3.30 per mmBTU.
The S & P / TSX composite index closed up 84.13 points at 15,670.70. It was a day after losing 434 points, or 2.7 percent, on concerns about a growing viral infection.
In New York, the Dow Jones industrial average rose 139.16 points to 26,659.11, a day after losing 943 points. The S&P 500 index rose 39.08 points to 3,310.11, while the Nasdaq composite index rose 180.72 points to 11,185.59.
Bregar said he doesn’t think fiscal stimulus negotiations in the US have developed into anything to encourage a rebound and he questions whether the US Federal Reserve will follow the ECB and offer additional assistance unless encouraged to do so.
“I don’t think the Fed knows what to do,” he said. “My bet is to do something when the market forces their hand.”
Thursday’s market moves came after record US third-quarter GDP and increased weekly unemployment figures.
The world’s largest economy grew at an astronomical annual rate of 33.1% from July to September, after shrinking by 31.4% in the second quarter. However, economic growth has not fully recovered from the pandemic.
“Here’s a happy headline: GDP is up 33 percent. But that doesn’t mean much to the market, at least in my opinion,” he said, adding the unemployment figures and unemployment figures were not surprising.
The number of US workers filing for unemployment benefits fell to 751,000 from 791,000 a week earlier, but continued claims remained very high.
Eight of the 11 major TSX sectors were higher, including materials and finance.
Materials rose 1.5 percent with Alamos Gold Inc. surged 12.5 percent despite lower gold prices.
December gold contracts fell US $ 11.20 to US $ 1,868.00 per ounce and December copper contracts fell 0.75 percent to nearly US $ 3.06 per pound.
The financial heavyweights gained 1.3 percent with Manulife Financial Corp. up 2.1 percent and Royal Bank of Canada 1.9 percent higher.
A five percent drop by Shopify Inc. pushing technology lower.
The Canadian dollar was trading for 74.91 US cents compared with 75.18 US cents Wednesday.
More global risk-off activity could send the loonie on a new downtrend, falling to around 73 cents, Bregar said.
“Any big sell-off in stocks or a sustained move lower could impact the Canadian dollar.”
This report by The Canadian Press was first published on October 29, 2020.