Traders work on the floor of the New York Stock Exchange (NYSE) in New York City May 16.Brendan McDermid/Reuters
Canadian stocks rose on Monday, trading at a two-week high, as crude prices jumped to the highest in six months and metals from gold to copper rallied.
The benchmark S&P/TSX Composite Index rose 1.05 per cent, or 144.91 points, to 13,893.49 in Toronto, following a 0.3-per-cent gain last week. The gauge now trades at 21.3 times earnings, about 12 per cent higher than the 19 times valuation of the S&P 500, data compiled by Bloomberg show.
Suncor Energy Corp. and Goldcorp Inc. jumped more than 2.6 per cent as energy and raw-materials producers climbed at least 2 per cent to lead gains in nine of the 10 industries in the S&P/TSX.
The two industries account for about 32 per cent of the broader benchmark by market capitalization and have led gains this year with advances of at least 12 per cent. That's helped the S&P/TSX post one of the best performances this year, behind only New Zealand out of 24 developed markets.
Crude futures rose in New York to top $47 a barrel. The market has shifted into a supply deficit earlier than expected following supply disruptions around the world, Goldman Sachs Group Inc. said in a report. The bank raised its price forecasts, while projecting a return to surplus early next year. Militant attacks and pipeline outages have cut volumes in Nigeria by at least 30 percent, while wildfires halted production in the Alberta oil sands last week.
Gold extended Friday's gains, pushing its advance this year to almost 21 per cent as investors sought a haven from equity turmoil and the Federal Reserve dialed back expectations for interest rate increases, making the metal more attractive as a store of value. First Quantum Minerals Ltd. and Teck Resources Ltd. rose at least 3.8 per cent as iron ore climbed in China as daily steel output jumped to a record in April.
Penn West Petroleum Ltd. plunged 21.9 per cent, sliding to a three-month low, after the oil producer said it was working with lenders to amend its borrowing limits by the end of the second quarter and is a "going concern" risk if it can't reach an agreement. Penn West will continue asset sales and look for other sources of capital from investors. The company had $1.86-billion in long-term debt at the end of the first quarter.
Wall Street rallied sharply on Monday, juiced by a jump in Apple shares and gains from energy stocks that were backed by stronger oil prices.
The Dow Jones industrial average rose 174.32 points, or 0.99 per cent, to 17,709.64, the S&P 500 gained 20.02 points, or 0.98 per cent, to 2,066.63 and the Nasdaq Composite added 57.78 points, or 1.22 per cent, to 4,775.46.
Apple shares were up 3.7 per cent after Warren Buffett's Berkshire Hathaway reported a stake worth about $1-billion in the iPhone maker. The stock, which had lost about one-fifth of its value in the past month, gave the biggest boost to the three indexes.
The S&P energy sector was the best-performing group as oil prices hit six-month highs.
Last week, the Dow and S&P 500 fell for a third straight week, while the Nasdaq's losing streak hit four weeks.
Gloomy quarterly reports from retailers had clouded the market last week. The retail sector is in focus again, with Wal-Mart, Home Depot and Target set to report results this week.
The S&P 500 is up more than 1 per cent this year. While the benchmark index has risen about 14 per cent since February lows, the rally fizzled out in the last few weeks amid mixed corporate earnings and economic data.
Oil rose to a six-month high as Goldman Sachs Group Inc. said the market moved into a deficit earlier than expected following supply disruptions in Nigeria and an increase in demand.
Futures climbed 3.3 per cent in New York. The shift to a supply deficit this month came one quarter earlier than forecast, Goldman Sachs said in a report. The bank raised its price forecasts, while projecting a return to surplus early next year. Militant attacks and pipeline outages have cut Nigerian volumes by at least 30 percent, its petroleum minister said last week.
"There are a lot of disruptions out there and as a result crude production is down," said Michael Wittner, the New York-based head of oil-market research at Societe Generale SA. "Nigeria is the big one right now. There are also disruptions in Libya, Venezuela and a number of other places."
After falling to a 12-year low in February, oil has rebounded on signs the global glut will ease amid production cuts. The supply surplus in the first half of this year is proving to be smaller than estimated, the International Energy Agency said last week, citing robust demand in India and other emerging nations. Morgan Stanley, Barclays Plc and Bank of America Corp. joined Goldman Sachs in noting that supply losses are leading markets to rebalance.
West Texas Intermediate for June delivery rose $1.51 to settle at $47.72 a barrel on the New York Mercantile Exchange. It's the highest close since Nov. 3. Prices have climbed more than 80 per cent from this year's low.
Brent for July settlement rose $1.14, or 2.4 per cent, to $48.97 a barrel on the London-based ICE Futures Europe exchange. The contract also closed at the highest level since Nov. 3. The global benchmark crude ended the session at a 55 cent premium to July WTI.
Fuel prices have surged with the gain in crude. Gasoline for June delivery climbed 1.1 per cent to $1.063 a gallon, the highest close since August. June diesel advanced 2.6 per cent to $1.4401, the highest since November.
The gain in futures bolstered equities. Commodity companies accounted for four of the seven biggest gainers on the Standard & Poor's 500 Index. The S&P 500 Oil & Gas Exploration and Production Index climbed as much as 3.6 percent before closing up 2.5 percent.
"The physical rebalancing of the oil market has finally started," Goldman analysts Damien Courvalin and Jeffrey Currie wrote in the report dated May 15. "The market has likely shifted into deficit in May."
Goldman increased its WTI price forecasts for the second quarter through the fourth, while raising its full-year 2016 projection to $44.60 a barrel from $38.40. There'll be a more gradual decline in inventories in the second half than previously estimated and a return to a production surplus in the first quarter of 2017, with low-cost output continuing to grow, the bank said.
The global oil market will return to balance in the third quarter, Daniel Yergin, vice chairman of industry consultants IHS Inc., said on Bloomberg Television. Crude will probably trade around $50 in the second half of 2016, he said.
The oil market "looks set on a course for rebalancing much faster than previously expected," making the risk of a sharp price drop unlikely, Barclays analysts Miswin Mahesh and Kevin Norrish said in a report. Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, reiterated his forecast for U.S. prices to reach $54 in the fourth quarter as supply retreats.
"There's optimism about the direction of the market," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. "Between Nigeria, Libya and Canada, we've lost a substantial amount of output."
With files from Reuters