Stocks in Canada and the U.S. bucked the overseas trend on Thursday, rising on hopes that the U.S. will move soon to inject more liquidity into the economy.
Many investors are now speculating that the U.S. Federal Reserve will vote next week to enact additional stimulus measures after the local employment picture worsened.
Claims for jobless benefits unexpectedly climbed by 6,000 to 386,000 last week, exceeding economists’ forecast that claims would fall to 375,000, according to the median estimate in a Bloomberg survey.
Stimulus brings with it fears of inflation. But consumer price index figures released in the U.S. today showed that the cost of living declined 0.3 per cent in May, more than forecasted and the biggest drop since December 2008. That data may give the Fed the confidence it needs to inject more money into the economy.
In Toronto, the S&P/TSX swung between small gains and losses. It recently traded down 31.32 points at 11466.55. The energy sector led all others.
In New York, the S&P 500 gained 1.94 points to 12530.43 and the Dow Jones industrial average rose 34.05 points. Health cares stocks were performing the best, while the consumer staples sector declined in value by more than 2 per cent.
The price of oil increased by 44 cents, to $83.06 a barrel. Gold rose by $8.30 an ounce to $1,627.70. The Canadian dollar added 0.44 of a cent to 97.6 cents.
In a further sign that the financial crisis is spreading beyond Greece, Moody’s cut its rating on Spanish debt by three notches. But the stock market remained steady and Spain’s IBEX 35 benchmark index was the only major European or Asian index in positive territory on Thursday.
“This suggests that traders once again have come to grips with the gravity of the dire financial situation in Spain much faster than the credit agencies and have already priced higher risks,” Colin Cieszynski, an analyst with CMC Markets Canada, said in his morning note.