A Bay Street sign, a symbol of Canada's economic markets and where main financial institutions are located, is seen in Toronto, May 1, 2013.Mark Blinch/Reuters
The Canadian economy's commodity-heavy tilt has returned to being a boon for the nation's financial markets.
The benchmark equity index extended the longest winning streak since August to six days on Thursday, as beaten-down energy and mining shares continued a rebound amid a rising resource prices.
The Standard & Poor's/TSX Composite Index rose 0.81 per cent, or 105.72 points, to 13,123.65 in Toronto, pushing the six-day gain to over 3 per cent. The surge has erased a loss for the year that almost reached 10 per cent in February, leaving the Canadian benchmark and shares in New Zealand as the only markets in the developed world in positive territory.
Shares in the Canadian benchmark trade at almost 22 times earnings, roughly 21 per cent more expensive than the valuation of the Standard & Poor's 500 Index, data compiled by Bloomberg show. Canada's resource-rich index has benefited from a surge in the price of gold and crude's rebound from a 12-year low.
Global equities were little-changed Thursday, as European stocks halted their longest winning streak since October and U.S. shares fluctated as investors await the latest jobs data.
Raw-materials and energy producers rallied the most in the S&P/TSX as eight of 10 industries advanced. Gold held near a three-week high as copper extended a rally.
Canadian Natural Resources Ltd., Canada's largest heavy- crude producer, surged 9 per cent to the highest level this year. The energy producer lowered its 2016 capital budget about 22 per cent, now targeting spending of $3.5-billion to $3.9-billion this year, down from as much as $5-billion in November. Canadian Natural also reported an 89-per-cent decline in fourth- quarter profit.
Valeant Pharmaceuticals International Inc. fell 4.2 per cent. Valeant's head of U.S. dermatology products, Deb Jorn, is departing the company, a move the drugmaker said is unrelated to any action taken by an ad hoc board committee probing Valeant's dealings with a controversial mail-order pharmacy. Shares of Valeant have plunged 74 per cent from an August high amid intense scrutiny from investors and lawmakers over its pricing practices.
SNC-Lavalin Group Inc was up 3.3 per cent after posting a better-than-expected adjusted fourth-quarter profit and said it saw profit growth at its core engineering and construction business in 2016.
U.S. stocks rose, led by gains in energy shares to extend a three-week rally before Friday's payrolls report that may provide a clearer picture on the strength of the economy and path for interest rates.
Energy producers in the Standard & Poor's 500 Index erased 2016 declines as a rally in the group helped equities shake off earlier weakness for a second day. Banks also gained momentum in the afternoon, rising for the fifth time in six days. Health- care and technology shares struggled, with Microsoft Corp. losing 1.1 per cent. Kroger Co. sank 7 per cent after the grocer forecast slower growth this year.
The S&P 500 rose 0.4 per cent to 1,993.39 in New York, wiping out a drop of as much as 0.5 per cent to hold at an eight-week high.
The Dow Jones industrial average rose 44.24 points, or 0.26 per cent, to 16,943.56, while the Nasdaq Composite gained 4 points, or 0.09 per cent, to 4,707.42.
"Investors are clearing the decks ahead of tomorrow's jobs report," said Alan Gayle, senior strategist for Atlanta-based Ridgeworth Investments, which has about $42.5-billion. "Anything that moves in the direction of the Fed's game plan of four rate hikes this year will be a real market-mover. A big gain in tomorrow's jobs report would definitely put a near-term hike back on the table."
Investors are watching economic reports as central-bank meetings approach, with the government's monthly nonfarm payroll figures looming large tomorrow. Data today showed growth in service industries slowed for a fourth straight month in February. A separate gauge showed factory orders in January rose less than expected, while the number of claims for unemployment benefits remained consistent with a steady labor market.
"Investors definitely key on payroll numbers, and people are going to be positioning themselves for them throughout the day," said Stephen Carl, principal and head equity trader at Williams Capital Group LP.
The S&P 500 has jumped 9 per cent from a 22-month low reached in February, though the gains have come amid the weakest volume in 2016, signaling a lack of conviction in the rally. The benchmark has trimmed its 2016 decline to 2.5 per cent as banks, consumer and technology companies have bolstered the comeback, and it's on track for a third straight weekly gain of more than 1.5 per cent for the first time since 2009.
Oil ended near the highest closing level in eight weeks in New York as a jump in U.S. crude inventories was countered by a decline in the nation's oil production.
Futures were little changed. Output fell for a sixth week to 9.08 million barrels a day, the lowest level since November 2014, according to the Energy Information Administration. Crude inventories rose, keeping supplies at the highest in more than eight decades. OPEC members will meet with Russia and other producers in Moscow on March 20 to resume talks on an output cap, Nigeria's oil minister said.
"The mood has changed in the market and we are a little bit more optimistic about the future," said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. "The market is shaking off the big inventories builds that we saw in recent weeks."
Oil is still down about 6 per cent this year on speculation a global glut will be prolonged amid brimming U.S. stockpiles and the outlook for increased exports from Iran after the removal of sanctions. Exxon Mobil Corp. scaled back production targets and said drilling budgets will continue to drop through the end of next year as the oil market shows no signs of a significant recovery.
West Texas Intermediate for April delivery fell 9 cents to close at $34.57 a barrel on the New York Mercantile Exchange. The contract rose to $34.66 Wednesday, the highest settlement since Jan. 5. Total volume traded was about 16 per cent above the 100-day average.
Brent for May settlement gained 14 cents to $37.07 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a premium of 74 cents to WTI for May.
U.S. crude stockpiles expanded by 10.4 million barrels to 518 million, according to a report from the EIA Wednesday. Supplies at Cushing, Okla., the delivery point for WTI and the nation's biggest oil-storage hub, rose for a fifth week to a record 66.3 million barrels.
The market's saying "You can't ignore fundamentals," said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. "With the massive amount of supplies that we have, the market should go lower. I think prices will go back to below $30 in a few weeks."
Others are more optimistic. There will be a "dramatic price movement" when the meeting between OPEC members and Russia takes place, Nigerian Petroleum Minister Emmanuel Kachikwu said at a conference in Abuja on Thursday. Saudi Arabia, Russia, Qatar and Venezuela agreed on Feb. 16 in Doha that they would freeze production, if other producers followed suit, in an effort to tackle the global oversupply.
With a file from Reuters