Traders work on the floor of the New York Stock Exchange (NYSE) Feb. 26.Brendan McDermid/Reuters
Canadian stocks advanced a second day on Friday, as crude oil's highest price in a month boosted energy producers and consumer shares advanced amid data showing faster-than-forecast growth in the U.S..
The Standard & Poor's/TSX Composite Index rose 0.35 per cent, or 44.2 points to 12,797.79 in Toronto. The benchmark equity gauge has rebounded 6.2 per cent from a Feb. 11 low and is less than 1.7 per cent from reversing losses for the year. The index has recovered to a loss of only 0.2 per cent in February, trying to avoid a ninth loss in the past 10 months.
Global equities climbed Friday after China signaled it has room for additional stimulus, while American data bolstered confidence in the world's largest economy. The two nations are Canada's largest trading partners. The country's resource-rich index has benefited from a surge in the price of gold and crude's rebound from a 12-year low.
The S&P/TSX is one of the best-performing markets in the developed world this year, battling with New Zealand for the top spot and outpacing returns from markets in the U.S., U.K. and Germany. Shares in the Canadian benchmark trade at about 20 times earnings, roughly 13 per cent more expensive than the valuation of the Standard & Poor's 500 Index, data compiled by Bloomberg show.
Energy companies advanced 1 per cent on Friday as oil in New York extended gains from a four-week high, headed for a 11-per-cent jump for the week. MEG Energy Corp. increased 13.5 per cent, while Pengrowth Energy Corp. rose 7.5 per cent.
Bombardier Inc. fell 1.9 per cent as the aircraft maker's troubled C Series program was dealt another blow after one of its largest customers, Republic Airways Holdings Inc., filed for creditor protection in New York Thursday.
Magna, the autoparts maker, increased 7.3 per cent for the biggest gain in six weeks after fourth-quarter sales beat estimates. The company also raised its dividend. Goldcorp plunged 13 per cent after the world's third most valuable gold producer posted a surprise quarterly loss on asset writedowns.
U.S. stocks slipped, while still posting a second-straight weekly gain, with optimism on the economy tempered after signs of firming inflation fueled speculation interest rates may rise sooner than previously expected.
Equities struggled to add to gains Friday after a nearly 7-per-cent run-up in the two weeks since the Standard & Poor's 500 Index reached a 22-month low. Higher growth and inflation readings helped spur a stronger dollar, sending some companies with significant overseas business lower. Consumer staples fell, with Coca-Cola Co. down 2.3 per cent. Raw-materials producers rallied on easing growth concerns, with Freeport-McMoRan Inc. rising 4.2 per cent as copper surged.
The S&P 500 fell 0.2 per cent to 1,947.94 in New York, after rising as much as 0.6 per cent. The gauge held above its average price during the past 50 days after climbing through that level yesterday for the first time this year.
"There hasn't been a lot of conviction," said Michael Block, chief equity strategist at Rhino Trading Partners LLC in New York. "It tells me we're going to be stuck in a range here. We're up on oil stability, China talk from the PBOC and GDP wasn't a complete disaster with PCE a little better," he said referring to the personal consumption expenditures gauge.
A report today showed the Federal Reserve's preferred measure of inflation rose by the most since October 2014, illustrating the challenge for U.S. central bankers as they consider tighter monetary policy amid feeble global markets. Data also showed consumer purchases climbed in January by the most in eight months, fueled by faster earnings growth and indicating the biggest part of the economy gained momentum at the start of 2016.
Following the data, traders raised their bets for further Fed rate increases this year. The probability of a June boost rose to 35 per cent from less than 24 per cent Thursday, while odds of a December move reached 53 per cent from 36 per cent. Chances for a December hike had slipped to 11 per cent at the height of this month's stock selloff on Feb. 11.
"Inflation is definitely something that the Fed is looking at and it looks like it is ticking up," said Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc. "The problem is that we have economies that are not doing so hot. What you don't want is inflation with an economy that is slowing down."
Stocks in Asia and Europe rose after China's central bank said it sees room for monetary easing, and Group of 20 finance chiefs discussed stimulus efforts. Concern about the impact of China's slowdown on global growth and a related rout in commodity prices have helped push the S&P 500 down as much as 11 per cent this year on a closing basis to its lowest level since 2014.
Oil capped the biggest weekly gain since August amid signs of strengthening U.S. fuel demand and speculation that some producers will complete an accord to freeze output.
Crude rose 11 per cent for the week after data on Feb. 24 showed U.S. gasoline demand rose as supplies fell. Producers are deciding where to meet in March for discussions on the output freeze provisionally agreed between Saudi Arabia and Russia last week, Venezuelan Oil Minister Eulogio Del Pino said on the TeleSur television network. Prices dropped in late trading Friday as the dollar rose, curbing investor appetite for commodities priced in the U.S. currency.
"There are a lot of nervous shorts out there and they are reacting to these comments about an OPEC meeting with Russia," said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. "It's a repetition of what we have been hearing, but this talk continues to be rewarded by the market."
Crude is still down about 11 per cent this year on concern a worldwide surplus will be prolonged because of rising U.S. stockpiles, which have swelled to the highest level in more than eight decades. Iran has pledged to increase shipments by as much as 1 million barrels a day after sanctions were lifted last month, and officials there dismissed the prospect of joining the output freeze.
West Texas Intermediate for April delivery slipped 29 cents to settle at $32.78 a barrel on the New York Mercantile Exchange. Prices touched $34.69 earlier, the highest level since Jan. 28. Total volume traded was 23 per cent above the 100-day average.
Brent for April settlement slipped 19 cents to $35.10 a barrel on the London-based ICE Futures Europe exchange. Prices rose 6.3 per cent for the week. The European benchmark crude closed at a $2.32 premium to WTI, the most since Dec. 10.
"We've attracted a lot of length into the market," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Conn. "I don't see prices moving above $35 as long as we have more than 500 million barrels of crude in storage here, U.S. production remains above 9 million barrels a day, no producers are cutting back and Iran is intent on reaching pre-sanctions levels."