Global stocks recovered ground on Friday amid concerns about global economic growth amid rising coronavirus cases, which continued to weigh down oil and boost safe-havens like gold.
A slide in Canada’s main stock index halted on Friday but it still snapped a four-week winning streak.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 123.66 points, or 0.61%, at 20,339.02 amid broad-based gains, including a 0.5% jump in energy stocks and 0.9% rise in the heavyweight financial sector.
Concerns that economic growth in China and the United States was beginning to slow have hammered equities and commodities prices this week and knocked the trade-reliant Canadian stock index off record highs.
Gregory Taylor, portfolio manager at Purpose Investments, said Canada had a greater exposure to economically-sensitive sectors and “so has really been hit harder than others on the fear that the fourth (COVID-19) wave is going to cause a slowdown in the reopening.”
The Canadian dollar on Friday rebounded from an earlier 8-month low against the greenback, helped by strong domestic data and a stock market rally, but the currency was still lower for a fifth day and posted its biggest weekly decline since March last year.
The Canadian dollar was trading 0.1% lower at 1.2845 to the greenback, or 77.85 U.S. cents, after touching its weakest intraday level since last December at 1.2948. For the week, it was down 2.6%.
“The CAD was able to claw back most of those overnight losses with the firm reading in the Canadian retail sales report and comments by Fed’s Kaplan which helped to shift the negative sentiment in equity markets,” said Tony Valente, a senior FX dealer at AscendantFX.
It “kind of feels like a blow off top (in USD-CAD), a move that got too far ahead of itself,” Valente added.
Canadian retail sales surged 4.2% in June from May, led by a strong rebound in demand for clothing and accessories, while July retail sales likely fell 1.7%, data showed.
Wall Street rallied to close sharply higher at the close of a tumultuous week on waning concerns over whether the U.S. Federal Reserve could begin tightening its dovish monetary policy sooner than expected.
While all three major U.S. indexes ended solidly green, all posted weekly losses after a steep mid-week sell-off pulled the S&P 500 and the Dow away from a string of record closing highs.
“Towards the beginning of the week you saw traders balancing their books ahead of the Fed statement,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “And once the statement came out, you saw a bit of ‘sell the rumor buy the news.’”
Market-leading tech and tech-adjacent megacaps, which weathered the pandemic recession better than most, once again provided the biggest boost.
Growth stocks were also given a boost by U.S. Treasury yields, which ended the week lower due to concerns the health crisis could be a longer than expected hindrance to economic revival.
Announcements from a host of Asian nations that they are implementing drastic measures to curb the resurgence of COVID-19 due to the rise of the disease’s highly contagious Delta variant, put a damper on stocks associated with economic re-engagement.
Mixed economic data from the U.S. and China suggested the ongoing recovery from the most abrupt recession on record has passed its peak and lost some momentum.
Market participants now look to next week’s Jackson Hole Symposium, a gathering of major central bank leaders, for clues from Fed Chair Jerome Powell regarding the expected pace of recovery and the timeline for policy tightening.
“We’ve seen times in history where the Jackson Hole Symposium has drawn a lot of eyeballs but this year more so,” Keator added. “The Fed might use this opportunity to communicate what their plan is going forward.”
Unofficially, the Dow Jones Industrial Average rose 222.15 points, or 0.64%, to 35,116.27, the S&P 500 gained 35.79 points, or 0.81%, to 4,441.59 and the Nasdaq Composite added 169.95 points, or 1.17%, to 14,711.73.
All 11 major sectors of the S&P 500 ended the session higher.
Second-quarter reporting season has essentially run its course, with 476 of the companies in the S&P 500 having posted results. Of those, 87.4% have beaten consensus, according to Refinitiv data.
Farm and construction equipment manufacturer Deere & Co beat quarterly profit expectations and raised its full year guidance due to robust demand. Still, its shares lost ground.
Bristol-Myers Squibb advanced after the U.S. Food and Drug Administration approved the drugmaker’s cancer drug Opdivo.
U.S.-listed shares of China-based tech-related companies oscillated as market participants digested recent sell-offs resulting from Beijing’s ongoing regulatory crackdown, which has wiped half a trillion dollars from Chinese markets this week.
The MSCI world equity index, which tracks shares in 45 nations, rose 0.43%.
“We are seeing a relief rally in European and U.S. assets today,” said Phil Guarco, global investment specialist at J.P. Morgan Private Bank. “What’s at the root of the weakness? We are getting driven by increased ‘taper talk’ from the Fed, which has coincided with a soft patch in economic data from China and the U.S. and forward looking Delta variant concerns.”
A murky economic picture weighed on sentiment all week, setting a cautious tone ahead of a meeting of U.S. central bankers at Jackson Hole next week, with markets watching for any sign of monetary tightening in the world’s biggest economy. Federal Reserve meeting minutes released Wednesday showed Fed officials preparing to ease back on stimulus by year’s end, provided the economic continues to recover as expected.
Coronavirus concerns continued to weigh down oil markets, where the commodity was down for the seventh straight session. The prospect of new lockdowns, offices delaying returns to the office, and a surge in the safe-haven dollar all contributed to drive oil to levels not seen in three months.
Brent crude was last down 1.6% at $65.39 a barrel. U.S. crude was down 1.55% at $62.7 per barrel.
Economic and pandemic uncertainty boosted several safe havens in the markets. The U.S. dollar hit a fresh 9-1/2 month high Friday before dipping slightly.
The dollar index, which tracks the greenback versus a basket of six currencies, was down 0.12% around midday, but was in a position to see its strongest week in two months.
Gold also enjoyed a risk-averse boost Friday, with spot gold prices rising 0.19% to $1,783.49 an ounce. U.S. gold futures edged 0.2% higher to $1,787 per ounce.
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