Canada’s main stock index rose strongly on Monday helped by a rebound in marijuana energy stocks, even though oil prices were mixed as new sanctions against Iran were imposed.
At the close, the Toronto Stock Exchange’s S&P/TSX Composite Index ended up 98.42 points, or 0.65 per cent, at 15,217.70.
Eight of the index’s 11 major sectors were higher, led by a 4.4-per-cent gain in health care stocks and a 2-per-cent rise in energy stocks.
In the health care group, Canopy Growth rose 7.7 per cent, Bausch Health Companies Inc., formerly Valeant, which will announce results on Tuesday, rose 5.7 per cent. Aurora Cannabis gained 3.3 per cent.
Oil prices were mixed on Monday after a steep five-day decline, as the United States formally imposed punitive sanctions on Iran but granted eight countries temporary waivers allowing them to keep buying oil from the Islamic Republic. The sanctions are part of U.S. President Donald Trump’s effort to curb Iran’s missile and nuclear programs and diminish its influence in the Middle East.
Brent crude futures rose 34 cents to settle at US$73.17 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 4 cents to settle at US$63.10 a barrel. Both oil benchmarks have slid more than 15 per cent since hitting four-year highs in early October.
Baytex Energy rose 7.5 per cent, and Paramount Resources gained 6.8 per cent. Encana was up 3.6 per cent.
Consumer staples stocks rose 2.2 per cent as Loblaw gained 4.8 per cent and Metro Inc. rose 3.6 per cent.
However, technology stocks fell 1.1 per cent and the materials sector, which includes precious and base metals miners, edged down 0.9 per cent, as gold and copper prices fell after investors took some profits following a rally over the past week.
On Monday, Bank of Canada Governor Stephen Poloz said market volatility, a stronger U.S. dollar and higher yields for long-term bonds are signs that markets are becoming more normal, rather than an indication of trouble.
Mr. Poloz, speaking to a business audience in London, pushed back against critics who complain that economic forecasts - including those from the Canadian central bank - are too optimistic given recent equity market turbulence.
As banks start to withdraw a decade’s worth of stimulus, long-term bond yields are rising, equity markets are returning to a more normal level of volatility and the U.S. dollar is strengthening to reflect the booming American economy, he said.
The Canadian dollar was trading slightly higher Monday at 76.26 cents US.
Wall Street stock indexes mostly rose on Monday, the eve of U.S. midterm elections to determine whether U.S. President Donald Trump’s Republican party retains control of congress and also ahead of a meeting of Federal Reserve policy makers.
The S&P 500 rose on Monday, with the biggest boosts coming from the financial, energy and defensive sectors as investors showed caution on the eve of U.S. congressional elections.
The Dow Jones Industrial Average rose 191.07 points, or 0.76 per cent, to 25,461.9, and the S&P 500 gained 15.26 points, or 0.56 per cent, to 2,738.32 but the Nasdaq Composite dropped 28.14 points, or 0.38 per cent, to 7,328.85.
The energy sector, which has lagged the broader S&P 500 this year, was up 1.6 per cent after the United States imposed a range of punitive sanctions on Iran, lifting oil prices, which helped the Dow.
“Anytime utilities and consumer staples are up that’s a little fear ... it’s the Iran sanctions poking a stick at a part of the world that’s famous for not being amenable to that,” said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.
Investor aversion to risk the day before U.S. mid-term elections also helped to put pressure on sectors such as technology, communications services and consumer discretionary.
“Regardless of your political bent you don’t know what’s going to happen on Tuesday that’s going to affect the next few years so you’re going for safety,” said Forrest.
Opinion polls showed a strong chance of President Donald Trump’s Republican Party holding the Senate but losing control of the House of Representatives to the Democrats - a potential hurdle to Trump’s pro-business agenda, which has been a major driver of the stock market’s rally since the 2016 election.
“What’s spooking the market is not Congress or Senate,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham, “what’s spooking the market is the volatility of Trump,” which might not be tempered by any change in congress.
Among the S&P 500’s 11 major sector indexes, the real estate sector was up 1.9 per cent making it the biggest percentage gainer. Utilities rose 1.3 per cent while consumer staples was up 1.2 per cent.
The Nasdaq index fell, pressured by slumping shares of Apple and Amazon. A 2.8-per-cent drop in Apple shares represented the biggest drag on Nasdaq after a Nikkei report that the company had told its smartphone assemblers to halt plans for additional production lines dedicated to the iPhone XR.
The stock was on track to post its worst two-day loss since January 2013, after the company’s disappointing holiday-quarter forecast sent its shares down 6.6 per cent on Friday.
Berkshire Hathaway jumped 4.7 per cent after the conglomerate run by billionaire Warren Buffett said its quarterly operating profit doubled.
The gains helped lift the S&P financial index 1.4 per cent ahead of the Federal Reserve’s two-day monetary policy meeting starting on Wednesday. Citigroup rose 2.1 per cent and J.P. Morgan Chase rose 0.7 per cent.
Investors have been worried about tightening U.S. monetary policy, especially after a string of strong economic data, including Friday’s jobs report.
With the Federal Reserve meeting on Wednesday and Thursday, investors were also concerned about prospects for tighter U.S. monetary policy after strong economic data.
Benchmark 10-year notes last rose to yield 3.2027 per cent, from 3.214 per cent late on Friday. The 30-year bond last rose to yield 3.4353 per cent, from 3.454 per cent late on Friday.
With files from Reuters