The close: TSX rallies 3.8% as oil sees biggest percentage gain ever

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U.S. and Canadian stocks enjoyed a respite from the brutal selloff of the past four weeks, posting gains after central banks announced new measures to combat the devastating economic impact from the coronavirus pandemic.

The S&P 500 gained 11.29 points or 0.5 per cent, after recovering from a 3 per cent decline at the start of trading.

The relatively slight move for the day marked the first time in the past nine trading sessions that the index didn’t swing up or down by 4 per cent or more during its steepest descent ever.

Canada’s S&P/TSX Composite Index gained 3.8 per cent. The impressive move was helped by the rebounding price of U.S. crude oil, which surged nearly 25 per cent – a record in percentage terms – from multiyear lows on Wednesday.

The rebound in oil follows a report from Wall Street Journal that the Trump administration may attempt diplomatic efforts to get Saudi Arabia to cut production.

Rising oil lifted beaten-up energy stocks. Suncor Energy Inc. rose 3.7 per cent and Canadian Natural Resources Ltd. rose 1.8 per cent.

But some of the biggest moves in Canada were from companies that are particularly exposed to the global economy, suggesting some investors believe that a recovery is in sight. Interfor Corp., a lumber company, surged 24 per cent. Magna International Inc., an autoparts company, rose 8.8 per cent. And Manulife Financial Corp., the insurance giant, rose 9.5 per cent.

Stocks have embarked upon several brief rebounds recently, only to see the gains disappear as news about the COVID-19 outbreak grows increasingly grim. Each rebound has been followed by lower lows for major indexes.

The backdrop on Thursday was a mix of bleak economic data with some encouraging signs.

The bleak part: U.S. initial jobless claims for last week surged by 70,000, the biggest week-over-week rise since 2012. Observers warn that numbers for next week will be far worse, given the number of businesses that are closing their doors.

“A sharp rise in new unemployment claims last week is just the tip of the iceberg,” Josh Nye, an economist at Royal Bank of Canada, said in a note.

But central banks continue to roll out efforts to combat an economic downturn that threatens to take a 14 per cent chunk out of U.S. gross domestic product in the second quarter, according to an estimate from the chief economist at JP Morgan Chase & Co.

Among the latest moves, the Bank of England cut its key interest rate to 0.1 per cent and boosted its bond-buying program by £200-billion in an effort to keep credit flowing. And the U.S. Federal Reserve expanded swap lines, designed to reduce to stress in U.S. dollar funding outside the United States as demand for greenbacks soars next to other currencies, including the Canadian dollar.

“While the additional swap lines announced by the Fed today seem to have given respite to a few embattled currencies, they may not be sufficient to stop the dollar in its tracks,” Oliver Allen, an economist at Capital Economics, said in a note.

The Canadian dollar was steady on Thursday, at US68.9 cents, after sliding to its lowest level since 2003 during market turmoil on Wednesday.

On Wednesday evening, the European Central Bank announced that it will buy an additional €750-billion of bonds in an attempt to prop up the eurozone economy.

“Extraordinary times require extraordinary action,” ECB president Christine Lagarde tweeted.

The bond market also showed some encouraging signs, as prices increased and yields declined. Despite strong global demand for havens amid tremendous uncertainty over economic activity and corporate profits, parts of the bond market have been behaving unusually over the past week: Bond prices have slumped, sending yields (which move inversely to prices) higher.

On Thursday, though, the yield on the 10-year U.S. Treasury bond fell as low as 1.05 per cent early in the day, down about 14 basis points (there are 100 basis points in a percentage point).

But credit markets continue to reflect concerns about the financial health of indebted companies with shaky credit ratings. The SPDR Bloomberg Barclays High Yield Bond ETF, an exchange traded fund that provides exposure to U.S. junk bonds, fell 2.3 per cent on Thursday, bringing its losses since Feb. 20 to about 20 per cent.