Canada’s main stock market notched on Friday its biggest gain since October 2008, as Canada ramped up stimulus to ease the economic impact of the coronavirus outbreak, while the Canadian dollar edged higher after hitting an earlier four-year low.
The Bank of Canada unexpectedly cut its overnight rate by 50 basis points to 0.75%, its second half-point cut in nine days, and the government said it would offer $10-billion in credit support to businesses.
Hopes of coordinated stimulus from world governments boosted stocks globally after several sessions of sustained, heavy losses on expectations of a global slowdown that could be prolonged.
U.S. President Donald Trump declared a national emergency to help facilitate increased funding to combat the virus.
The Toronto Stock Exchange Composite Index, was up 8% at 13,520.53, recovering some ground after a record decline on Thursday. For the week, the index was on track to fall about 15%, its biggest drop in Refinitiv Eikon data going back to July 1979.
Nine of the TSX’s 10 main groups were higher, led by a 10.1% gain for the heavily-weighted financial services sector, while energy was up 5.6%.
The price of oil, one of Canada’s major exports, had its biggest weekly slide since the 2008 financial crisis despite settling 0.7% higher on Friday, as the coronavirus outbreak threatened demand and crude producers promised more supply.
Despite prospects for stimulus, economists see potential for Canada’s economy to slip into recession.
“We’re penciling in two negative quarters in Q2 and Q3 at this point,” said Nathan Janzen, a senior economist at Royal Bank of Canada “Negatives from the virus and the oil price shock are too much to keep growth positive.”
Money markets expect the Bank of Canada to ease by an additional 25 basis points at its next scheduled rate announcement on April 15.
The Canadian dollar was trading 0.1% higher at 1.3912 to the greenback, or 71.88 U.S. cents, having touched its weakest intraday level since February 2016 at 1.3996.
Canadian government bond yields rose across a steeper yield curve, with the 10-year yield up 16.1 basis points at 0.754%. On Monday, the 10-year yield hit a record low at 0.233%.
In New York, the Dow Jones industrial average was up 1,985.00 points at 23,185.62. The S&P 500 index was up 230.38 points at 2,711.02, while the Nasdaq composite was up 673.07 points at 7,874.88.
U.S. 10-year Treasury yields jumped back over the 1% level on Friday after President Donald Trump declared a national emergency over the spreading coronavirus, a move that sent stocks soaring.
The 10-year note yield, which was at 0.934% before the president’s Rose Garden address, rose to 1.019%, up from 0.852% at Thursday’s close.
It came as the market wrestled with volatility and illiquidity even after the New York Federal Reserve made a massive amount of cash available to calm jitters.
Justin Hoogendoorn, head of fixed income strategy and analytics at Piper Sandler in Chicago, said there were “very little bids” in the market.
“It really does scream volatility, scream that there’s a lack of liquidity in the marketplace,” he said.
The pan-European STOXX 600 index rose 1.43% and MSCI’s gauge of stocks across the globe gained 1.72% after falling by the largest percentage on record on Thursday.
Earlier, Japan’s Nikkei fell 10% before paring losses to close 6% lower. Australia’s S&P/ASX200 had its wildest trading day on record, falling past 8% before surging in the last minutes of trade to settle 4.4% higher at the close.
Nikkei futures rose 3.53%.
Oil prices on Friday posted their worst week since the 2008 global financial crisis, rocked by the coronavirus outbreak and efforts by top exporter Saudi Arabia and its allies to flood the market with record levels of supply.
The rare combination of severe shocks to both supply and demand has caused the crude market to collapse as producers around the world steel themselves for an unexpected glut of oil in coming weeks.
“It’s a problem of an oil price war in the middle of a constricting market when the walls are closing in,” U.S. energy historian Daniel Yergin said.
World equities were headed for their worst week since 2008, with the coronavirus sparking panic selling across markets. The virus has infected at least 138,000 people worldwide and killed more than 5,000, disrupting business, markets and daily life.
Major oil producers were pumping more crude into the market as demand collapses. Saudi Arabia has chartered more than 30 crude supertankers to export oil in coming weeks, specifically targeting big refiners of Russian oil in Europe and Asia, in an escalation of its fight with Moscow for market share.
Goldman Sachs said it now expected a record oil surplus of six million barrels per day (bpd) by April, in a global market that usually consumes about 100 million bpd.
On Friday, prices were higher, rebounding after the United States and other nations signaled plans to support weakening economies. But Brent crude dropped 25% on the week, the biggest weekly fall since the 2008 global financial crisis. On Friday, Brent rose 63 cents to settle at $33.85 a barrel.
U.S. West Texas Intermediate (WTI) crude futures fell about 23% on the week, their biggest percentage decline since 2008. WTI rose 23 cents to settle at $31.73 a barrel, after earlier gaining to $33.87 a gallon.
Reuters