A trader works on the floor of the New York Stock Exchange (NYSE) in New York on Jan. 20.Michael Nagle/Bloomberg
Energy shares led Canadian stocks higher on Thursday, after the Standard & Poor's/TSX Index briefly tumbled Wednesday to the lowest level since August 2012, as comments by Mario Draghi fuelled speculation that the European Central Bank may bolster its stimulus programs as early as March.
The S&P/TSX rose 1.63 per cent, or 192.75 points, to 12,035.86 in Toronto after swinging between gains and losses earlier in the session. Energy companies posted the biggest gains among the 10 main industries, followed by consumer and utilities stocks. The benchmark gauge, which entered a bear market two weeks ago, touched its lowest level since August 2012 a day earlier. It's down about 8.5 per cent year-to-date.
Global equities rebounded after $1.1-trillion was wiped from the value of stocks Wednesday as investor sought reassurance from Draghi said that downside risks to the euro- area economy have increased since the year began. The central bank kept interest rates unchanged at record lows. That followed a decision Wednesday from Bank of Canada policy makers, who kept their benchmark interest rate unchanged, saying stronger U.S. demand, a weaker currency and two rate cuts last year are leading the economy out of an oil slump.
Energy companies gained over 5 per cent after four days of declines. Penn West Petroleum Ltd. jumped 14.5 per cent, while Crew Energy Inc. and Veresen Inc. also added at least 5.3 per cent, the most for each in almost a month.
Shares of consumer-staples jumped 2 per cent, led by gains of at least 2.5 per cent for Loblaw Companies Ltd. and Alimentation Couche-Tard Inc.
Industrials stocks fell for a third straight day, slipping 0.5 per cent. Bombardier Inc. tumbled 3.3 per cent after United Continental Holdings Inc. said it would buy Boeing Co.'s smallest jetliners, snubbing Bombardier's C Series.
Canadian Pacific Railway Ltd., which is attempting to acquire Norfolk Southern Corp., sank 0.96 per cent after reporting fourth-quarter earnings that missed analyst estimates as revenue fell amid declines in cargo including crude, metals and minerals.
The loonie added 1.08 of a U.S. cent, or 1.57 per cent, to 70.01 cents U.S. The Canadian dollar hadn't closed above 70 cents U.S. in more than a week.
"More ECB easing has helped to prop up European risk assets and that has a spillover effect on to the high-beta commodity currencies," said Mazen Issa, senior foreign-exchange strategist at Toronto-Dominion Bank in New York. "The risks tilt to the downside the longer that oil prices remain at these levels."
U.S. stocks rose, with the Standard & Poor's 500 Index recovering from a 21-month low, as energy shares rallied with oil and the European Central Bank signalled the potential for more stimulus measures amid uncertain prospects for global growth. The S&P 500 rose 0.5 per cent to 1,868.86 in New York, trimming an earlier 1.6-per-cent climb in a recovery from the lowest level since April 2014.
The Dow Jones industrial average rose 115.12 points, or 0.73 per cent, to 15,881.86, while the Nasdaq Composite added 0.37 points, or 0.01 per cent, to 4,472.06.
"It's good to see a reversal, to know that there are still buyers out there when things are oversold," said Aaron Jett, vice president of global equity research at Los Angeles-based Bel Air Investment Advisors LLC. "It's a jittery market, especially in oil. I find it difficult for people to invest long with a lot of confidence right now because there is a lot of pressure to the downside. We're speaking with clients quite frequently -- there's a lot of nervousness out there."
Equities alternated for a seventh day between gains and losses amid the S&P 500's worst start to a year since 2008. Sentiment has been weighed by concerns that the slide in crude oil and weakness in China will drag down global growth, offset by occasional bouts of optimism that policy makers will act to help stem the rout. Calling the country's market "not yet mature," China's Vice President Li Yuanchao said the government would boost regulation in an effort to avoid too much volatility.
European Central Bank President Mario Draghi said during a press conference today that downside risks to the euro-area economy have increased since the year began, and the central bank may need to bolster its stimulus programs as soon as March amid rising concerns about the recovery. The bank kept interest rates unchanged.
Oil's crash, amid a Chinese economic slowdown that's throwing international markets into turmoil, has raised concern that record-low rates and a 1.5 trillion-euro ($1.6-trillion) bond-buying program may not be enough bring inflation back to just under 2 perc ent from current levels near zero.
Global equities' downward spiral at the start of the year got even worse as oil continued a plunge and a slowdown in China weighed on sentiment, wiping about $2.2-trillion off the value of U.S. stocks. Investors from Japan to Germany and Brazil have watched their stock markets tumble into bear territory. The S&P 500 has fallen 8.6 per cent year to date, and is down about 12 percent from a record set in May.
Investment managers are warning that the benchmark, could drop another 10 per cent and oil could fall as low as $20 a barrel. Jeffrey Rottinghaus, whose T. Rowe Price mutual fund beat 99 per cent of rivals over the past year, also said the U.S. economy may slip into a mild recession.
"I think people are starting to believe that while we may not be at an absolute bottom, we may be close," said Peter Jankovskis, who helps oversee $1.9-billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments. "Oil has been a very strong theme, though I think certainly in months that are heavy in central bank decisions that central bank activity has to a degree overwhelmed oil."
Investors are keeping close watch on progress in the economy to gauge the trajectory of U.S. interest rates before the Federal Reserve's meeting next week. Data Thursday showed the number of applications for unemployment benefits unexpectedly increased last week to a six-month high, indicating tempered progress in the labour market.
Oil prices rebounded over $1 a barrel from 12-year lows on Thursday, their biggest daily gain this year, as rallying financial markets gave some bearish traders reason to take profits on record short positions.
U.S. crude vaulted back toward $30 per barrel as hopes for easier monetary policy from Europe fuelled a recovery in stock markets in European and on Wall Street.
Prices did not falter on U.S. data showing a larger-than-expected rise in record high crude and gasoline stockpiles. Instead, the report triggered buying among traders who had feared the figures could be even worse.
Still, few traders expected a quick recovery from this year's slump of more than 25 per cent, amid pressure from a deepening supply glut and signs of economic weakness in China - the world's No. 2 oil consumer.
"The fundamentals are still weak and you still have worries about economic growth and its impact on fuel demand, so this is probably a sign that things have been overdone more than anything else," said Gene McGillian, analyst at Tradition Energy in Stamford, Conn.
He said the market was going to be vulnerable to small turnarounds, given this year's freefall.
Benchmark Brent futures for March delivery rose $1.37 to settle at $29.25 a barrel, a 4.9-per-cent gain. U.S. crude rose $1.18 to settle 4.2 per cent higher at $29.53 per barrel.
Brent rose as much as 7 per cent during the session to $29.84, while WTI rose as much as 6.7 per cent to $30.25.
Yet, Brent has lost more than 25 per cent of its value so far in January and is on track for its biggest monthly fall since 2008.
Thursday's rally got going after Mr. Draghi said it would be necessary to review the Bank's monetary policy stance in March, fuelling hopes for more quantitative easing.
"The market, especially the equity markets, want stimulus and need stimulus in order to keep the rally going," said Brian LaRose, a technical analyst with United-ICAP.
"It's all about economic expectations here and the U.S. equity markets are going to be in the driver's seat over the near term."
Gains accelerated after the U.S. Energy Information Administration (EIA) reported that nationwide crude stocks rose by 4 million barrels, more than the forecast 2.8 million barrels. But traders were still encouraged that stockpiles at the Cushing, Oklahoma, delivery hub rose by only 191,000 barrels, less than some had feared.
In one of the few bullish spots, distillate fuel inventories fell by 1 million barrels, the EIA said.
With files from Reuters and The Canadian Press