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The Globe and Mail

The close: Energy stocks lead TSX to three-week high

Traders Frank O'Connell, James Riley, and Michael Smyth, left to right, work on the floor of the New York Stock Exchange, Friday, Feb. 23.

Richard Drew/AP

Canada's main stock index closed at a three-week high on Friday, with energy companies leading gains across the board.

The Toronto Stock Exchange's S&P/TSX composite index was up 130.28 points, or 0.84 per cent, at 15,638.45.

The energy group gained 1.9 per cent as oil prices rose to their highest in more than two weeks.

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Enerplus Corp. jumped 8.8 per cent to $14.49, while Crescent Point Energy Corp. increased 3.8 per cent to $9.54. Cenvous Energy Inc. was up 3.4 per cent to $9.62, and Encana Corp. rose 2.5 per cent to $14.

Royal Bank of Canada, Canada's biggest lender by market value, reported earnings per share, excluding one-off items, of $2.05 for the quarter through Jan. 31. Analysts had on average forecast earnings of $1.99 per share.

Its shares rose 0.4 per cent

The overall financials group, which accounts for more than one-third of the weight of the TSX, rose 0.6 per cent. Canadian Imperial Bank of Commerce increased 1.8 per cent to $119, while National Bank of Canada rose 1.6 per cent to $63.76.

The materials group, which includes precious and base metals miners and fertilizer companies, increased 1.4 per cent. Winpak Ltd. jumped 11.5 per cent to $50.41, while Nutien Ltd. finished up 5.5 per cent to $63.80.

Canada's annual inflation rate cooled in January from a year earlier as consumers paid less for gasoline and vehicles, but firmer underlying prices were seen keeping the Bank of Canada on track to raise interest rates again later this year.

World shares rose broadly on Friday, with technology stocks lifting Wall Street, while gold neared its biggest weekly loss this year as investors shrugged off concerns about interest rate hikes and the U.S. dollar rose.

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Stocks climbed across Asia and Europe, while soaring shares of Hewlett Packard Enterprise and HP Inc helped the U.S. technology sector surge.

The dollar edged higher against a basket of major currencies as investors positioned for a more aggressive U.S. Federal Reserve. The gains in the dollar pressured the euro, putting it on track for its second biggest weekly loss in nearly four months. The dollar index rose 0.2 per cent, with the euro down 0.33 per cent to $1.2288.

Broader concerns have lingered globally over the last few weeks, including how far and fast U.S. interest rates may rise and what would that mean for global borrowing costs, risk appetite and business confidence.

Those factors helped keep yields on benchmark 10-year U.S. Treasury notes near four-year highs this week, although yields started falling on Thursday and continued to slump.

The 10-year note last rose 15/32 in price to yield 2.8641 per cent, from 2.917 per cent late on Thursday.

"We think the (Federal Reserve) could well put U.S. rates up four times this year, but even then it only takes U.S. rates to 2.5 (percent) by the end of the year," said JPMorgan Asset Management global strategist Mike Bell. "So the question is, Would they continue at that pace in 2019?"

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The spotlight will be on new Fed chair Jerome Powell next week when he faces questions from both houses of the U.S. Congress in semi-annual testimony starting on Tuesday.

His audience will include investors who unceremoniously greeted his early tenure with one of the fastest 10.0-per-cent falls in Wall Street stocks in history earlier this month.

The pullback in Treasury yields as the Fed eased concerns about the path of interest rate hikes this year drove Wall Street stocks higher.

Tech shares climbed 1.69 per cent, led by Hewlett Packard Enterprise, which rose 10.4 per cent, and HP, up 3.6 per cent. The two companies, created from the split of Hewlett Packard Co in 2015, reported strong results and HPE announced a plan to return $7-billion to shareholders.

The Dow Jones Industrial Average rose 348.61 points, or 1.4 per cent, to 25,311.09, the S&P 500 gained 43.44 points, or 1.61 per cent, to 2,747.4 and the Nasdaq Composite added 127.30 points, or 1.77 per cent, to 7,337.39.

MSCI's gauge of stocks across the globe gained 0.77 per cent, with the pan-European FTSEurofirst 300 index rising 0.23 per cent and emerging market stocks up 1.28 per cent.

In Asian trading, MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.28 per cent higher, while Japan's Nikkei rose 0.72 per cent.

Gold's spot market price dropped 0.2 per cent to $1,329.11 an ounce. It has so far shed about 1.4 per cent this week, its biggest weekly decline since early December.

"We remain somewhat cautious on gold over the short term given that we think the dollar rally is still not over, especially in the light of U.S. Treasury yields remaining elevated," said INTL FCStone analyst Edward Meir.

Oil edged further upwards, supported by a dip in Libyan production and upbeat comments from Saudi Arabia that an OPEC-led effort to curb output is working.

U.S. crude oil futures settled at $63.55 per barrel, up 78 cents, or 1.24 per cent. Brent was last at $67.35, up 1.45 per cent on the day.

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