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Market News The close: Energy stocks lead TSX higher as oil jumps on hopes of delayed tariffs on Mexico

Canada’s main stock index edged higher in trading Thursday lifted by energy, materials and technology stocks as oil and gold prices rose.

The S&P/TSX composite index closed up 15.15 points, or 0.09 per cent, at 16,227.80.

Oil prices jumped more than 2 per cent on Thursday, reversing course after falling to near five-month lows in the previous session, following a report that the United States could postpone tariffs on Mexico.

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Brent crude futures settled at US$61.67 a barrel, gaining US$1.04, or 1.7 per cent. U.S. West Texas Intermediate crude futures settled at US$52.59 a barrel, up 91 cents, or 1.8 per cent. The benchmarks both rallied more than 2 per cent in post-settlement trade.

Energy stocks gained 0.8 per cent as Torc Oil rose 2.8 per cent, Encana gained 1.8 per cent, and Cenovus rose 1.6 per cent.

Earlier, data showed the country’s trade deficit shrunk – the latest sign the economy is recovering from a slowdown. Statistics Canada said rising exports and falling imports helped shrink Canada’s trade deficit in goods in April to $966-million. Analysts polled by Reuters had forecast a shortfall of $2.80-billion.

Gold and materials stocks also rose, up 0.4 per cent. Lundin Mining rose 2.1 per cent, First Quantam gained 2 per cent and Barrick was up 1.69 per cent.

The August gold contract was up US$9.10 at US$1,342.70 an ounce and the July copper contract was up 2.75 cents at US$2.65 a pound.

Tech stocks rose 1 per cent with Descartes Systems up 2.4 per cent, Absolute Software up 2.2 per cent and Kinaxis up 1.8 per cent.

Wall Street’s main indexes closed higher after a choppy session on Thursday, as investors grew more optimistic on trade after media reports the United States is considering a delay in imposing tariffs on Mexican imports.

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The Dow Jones Industrial Average rose 182.58 points, or 0.71 per cent, to 25,722.15, the S&P 500 gained 17.37 points, or 0.61 per cent, to 2,843.52 and the Nasdaq Composite added 40.08 points, or 0.53 per cent, to 7,615.55.

The report cited unidentified sources saying that U.S. President Donald Trump could delay the tariffs he had threatened to put on Mexican goods as soon as Monday.

This gave investors some hope. But Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey, was cautious.

“When you have a fluid situation like this in terms of the tariffs, it calls for caution and patience on the part of investors,” said Krosby.

The S&P 500 was on track to register the third straight session of gains for the first time since mid-May.

While investors are hopeful that the U.S. Federal Reserve could be open to cutting interest rates if needed, they were cautious before the U.S. jobs report due on Friday morning.

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“There’s a recognition that easier monetary policy is likely to prolong this economic cycle and is likely to support higher- than-normal valuation,” said Michael Arone, chief investment strategist at State Street Global Advisors.

“But for the market to move materially higher, there’s a feeling that trade agreements need to be reached in order to push economic growth higher.”

Earlier in the day Trump said he would decide on more tariffs “probably right after the G20” meeting later this month, which followed his warning overnight that he would levy duties on at least another US$300-billion worth of Chinese goods.

The trade-sensitive industrial sector pared losses late in the session but was still down 0.2 per cent, making it the biggest decliner among the 11 S&P 500 sectors.

Federal Reserve policymakers have hinted they would be ready to cut rates if the U.S.-China trade spat threatens a decade-long expansion. Since early May, Trump has slapped tariffs on Chinese imports and warned of U.S. levies on Mexico.

Also on Thursday, the European Central Bank’s decision not to raise interest rates in the next year led to a flattening of the U.S. Treasury yield curve, which came off its steepest level in seven months the previous day.

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The ECB also underscored the threat to global economic expansion from the trade disputes by trimming the region’s growth forecasts for the next two years.

The energy sector, which was the hardest hit last month by heightening trade tensions, rose 1.5%, making it the biggest percentage gainer, as crude prices steadied.

The U.S. Treasury yield curve flattened on Thursday as the European Central Bank committed to leaving interest rates steady into the first half of 2020, while major world stock indexes mostly edged higher.

The ECB’s move was less aggressive than what some traders had expected and led to selling of shorter-dated German government debt, which in turn spilled over to shorter U.S. Treasury maturities, traders and analysts said.

Much of the Treasury yield curve flattened, coming off its steepest level in seven months the day before. The gap between two-year and 10-year yields narrowed by 2.6 basis points to 25.10 basis points.

German 10-year yields tumbled to record low of -0.240 per cent before retracing to -0.232 per cent. Benchmark 10-year Treasury notes last rose 6/32 in price to yield 2.1019 per cent, from 2.123 per cent late on Wednesday.

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“In Europe, the selling came with some pricing in of an ECB rate cut,” said Subadra Rajappa, head of U.S. rates strategy at SG Corporate & Investment Banking in New York.

The pan-European STOXX 600 index lost 0.02 per cent and MSCI’s gauge of stocks across the globe gained 0.12 per cent.

Mexico’s peso suffered a double whammy of trade woes with the United States and the downgrade of the country’s credit rating.

The Mexican peso fell 0.81 per cent versus the U.S. dollar to 19.75.

The dollar index fell 0.46 per cent, with the euro up 0.66 per cent to $1.1293.

Oil futures were largely steady, after falling to near five-month lows in the previous session. U.S. crude fell 0.23 per cent to US$51.56 per barrel.

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With files from Reuters and The Canadian Press

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