Canada’s main stock index rose in Friday morning trading as energy stocks jumped with higher oil prices.
At 11:22 a.m. ET, the S&P/TSX composite index sat up 92.17 points, or 0.57 per cent, at 16,272.06.
Energy stocks increased 1.1 per cent, led by 2.2-per-cent increases from Cenovus Energy Inc., Canadian Natural Resources Ltd. and Husky Energy Inc.
Enbridge Inc. rose 5.7 per cent after a Minnesota regulator on Thursday approved a certificate of need for the rebuild of its Line 3 oil pipeline, angering environmentalists but offering hope to Western Canadian oil producers that have struggled to move crude oil to refiners.
First Quantum Minerals Ltd. was up 8.6 per cent after sources told Reuters that it could be a takeover target by Rio Tinto. Banking sources say pressure is mounting for a copper deal because of its widespread industrial use
Vancouver-based Nevsun Resources rose 5.1 per cent after bankers and analysts said it could also prove attractive for Rio Tinto.
U.S. stocks further extended gains on Friday, as Nike shares hit an all-time high after the world’s largest shoe maker posted a strong earnings report and as banking stocks surged on clearing the Federal Reserve’s stress test.
Nike’s shares surged as much as 13 per cent after the company returned to growth in North America last quarter and gave an upbeat forecast for the year.
The S&P financial sector, which snapped a 13-day losing streak on Thursday, jumped 1.61 per cent after U.S. lenders cleared the second part of the Federal Reserve’s annual stress tests.
Wells Fargo led the gains, surging 5.9 per cent, while Citigroup gained 2.4 per cent, Bank of America rose 1.4 per cent and JPMorgan was up 1.5 per cent.
The gains in Goldman Sachs and Morgan Stanley were lower as they cleared the test with conditions.
Also boosting financials was Commerce Department data that showed core personal consumption expenditures (PCE) in May hit the Federal Reserve’s 2-percent target for the first time in six years.
“Bank stocks really thrive in rising interest rate environment, we know that there are three or four rate hikes this year, and it’s starting to look like there will be a fourth one in December,” David McKnight, president of David McKnight & Co said.
After a slight wobble on a report that President Donald Trump has said he wanted the United States to withdraw from the World Trade Organization, the markets regained their footing after Treasury Secretary Steven Mnuchin told Fox Business Network that the Axios report was wrong.
Friday’s gains add a silver lining to what has been a somewhat turbulent week as the United States and China have gone back and forth over trade and tariffs as well as Chinese investments in American technologies.
McKnight said that Trump does not want the trade war especially given the mid-term elections that are coming up and “people are recognizing that trade wars aren’t likely to happen, that’s calming the nerves of some of the investors”.
The Dow Jones Industrial Average was up 279.90 points, or 1.16 per cent, at 24,495.95, the S&P 500 was up 25.72 points, or 0.95 per cent, at 2,742.03 and the Nasdaq Composite was up 69.00 points, or 0.92 per cent, at 7,572.69.
Seven of the 11 major S&P sectors were higher, with the energy index up 1.54 per cent as U.S crude futures rose to their highest since November 2014, while the consumer discretionary sector also rose about 1 per cent, boosted by Nike.
Constellation Brands fell 6.6 per cent after the Corona beer maker reported a lower-than-expected quarterly profit and maintained its full-year earnings forecast that missed estimates.
KB Homes rose 7.1 per cent after the homebuilder’s second-quarter results beat Wall Street estimates.
Oil prices increased Friday as U.S. sanctions against Iran threatened to remove a substantial volume of crude oil from world markets at a time of rising global demand.
U.S. crude rose 69 cents a barrel to $74.14, and earlier touched $74.37, the highest since Nov. 26, 2014. The contract was on track to close the week up 8 per cent.
Benchmark Brent crude jumped $1.49 to a high of $79.35 a barrel before easing back to $79.23 a barrel. The contract was on track to close the week up 4.8 per cent.
“All the potential shortfalls could outstrip the production increase agreed to by OPEC and Russia,” said Dominick Chirichella, Director of Risk Management at EMI DTN. There’s a risk that supplies from Iran could be cut further as there’s pressure on other countries to join the United States in sanctions, he said.
Iran is the fifth-largest oil producer in the world, pumping about 4.7 million barrels per day (bpd), or almost 5 per cent of total output, much of it to China and other energy-hungry nations such as India.
The U.S. government wants to stop Tehran exporting oil to cut off a vital supply of finance, and hopes other big oil producers in the Organization of the Petroleum Exporting Countries and Russia will make up for the deficit.
But the world oil market is already tight with unplanned disruptions in Canada, Libya and Venezuela removing supply.
Many analysts and investors think strict enforcement of U.S. sanctions against Iran will push up prices sharply.
“It is becoming increasingly clear that Saudi Arabia and Russia will struggle to compensate for potential losses in oil production from the likes of Venezuela, Iran and Libya,” said Abhishek Kumar, analyst at Interfax Energy in London.
Vienna-based consultancy JBC Energy said the stronger the implementation and enforcement of U.S. sanctions, the higher the oil price will go. “Triple-digit oil prices are not off the table,” JBC said.
A Reuters survey of 35 economists and analysts on Friday forecast Brent would average $72.58 a barrel in 2018, 90 cents higher than the $71.68 forecast in last month’s poll and compared with the $71.15 average so far this year.
North American oil stocks have fallen as an outage at Canada’s Syncrude has locked in more than 300,000 bpd of production. The outage is expected to last at least through July, according to operator Suncor Energy.
Reuters