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Dollar, stocks in strong rally
Global stock markets, the Canadian dollar and oil all rallied today as the mood in financial markets shifted markedly. Helping to drive stocks, and commodity-linked currencies such as the loonie, was positive news from Spain, a denial by China of a news report that it is reviewing its holdings of euro assets, which it described as "groundless," and the OECD's economic forecast yesterday.
The Dow Jones industrial average gained almost 3 per cent, the S&P 500 3.3 per cent, and the S&P/TSX composite almost 1.8 per cent. Oil jumped more than 3 (U.S.) a barrel to well over $74.
The Canadian dollar surged 1.66 cents to close at 95.24 cents U.S. It closed yesterday at 93.58 cents, though fell last night in Asian trading to a low of 93.28 cents. The loonie was caught up in the general euphoria today, helped by China's denial, signs that Europe is perhaps getting a handle on its debt troubles, and, in general, the fact that markets were oversold and had dropped further than they should have, said David Watt, the senior fixed income and currency strategist at RBC Dominion Securities.
The debate over whether the Bank of Canada will raise interest rates next week, for the first time since before the financial crisis and recession, also played into the dollar's rise.
"It doesn't hurt that we haven't had any terrible news coming out of the euro zone over the last couple of days," Mr. Watt said.
Scotia Capital economists Derek Holt and Karen Cordes Woods noted today that, while there have been extreme ups and downs, the Canadian dollar is outperforming most of its global peers. "The [U.S. dollar]has outperformed almost all currencies this month, but [the Canadian dollar]has held its own better than most. The [loonie]has slipped 4.9 per cent against the greenback so far this month ... The point is that [the Canadian dollar]has outperformed on the upside and downside of broad movements in global risk appetite compared to a basket of currencies. Investors have done well over-weighting both the [U.S. dollar]and [the Canadian dollar]in portfolios. Yes this has been a [U.S. dollar]friendly environment, at least for now and until U.S. admonishment of European finances swings around to focus on U.S. fiscal austerity and drag effects on U.S. GDP over the next three years."
Related: Wild dollar swings cause headaches
Sprott sees long market slump
Money manager Eric Sprott says he's bracing for a "long, deep" market slump, so he's buying gold. Mr. Sprott told Bloomberg News in an interview that the slump that so far has driven down the S&P 500 by more than 10 per cent is the start of a major pullback that will take the index, some time in the next year, below its weakest level of 2009. The $1-trillion bailout of the euro zone by the EU, International Monetary Fund and European Central Bank has failed to calm investors' nerves, while governments are running out of measures to continue pumping their economies.
"Our thesis is we're in for a long, deep cycle, and we've thought that since 2000, but up to this point, governments and central banks have always tried to stave it off," he told the news agency.
Mr. Sprott has boosted gold assets, and shares of gold companies, while betting against banks such as TD, Bank of Nova Scotia and National Bank of Canada through short sales.
Of course, Mr. Sprott is just one voice, though a prominent one in Canada. Mark Mobius of Templeton Asset Management Ltd. had a different view, also in an interview with Bloomberg.
Mr. Mobius has been buying stocks in the BRIC countries - Brazil, Russia, India and China - and "despite the fact that a lot of people that think that we entering a bear market, we don't believe so. This is a correction in an ongoing bull market."
Obama unveils new drilling rules
President Barack Obama today threw the offshore energy industry into a tailspin, unveiling sweeping new measures that will affect the sector for months to come. Mr. Obama extended a moratorium on drilling permits for six months, and suspended planned exploration drilling off the Alaska and Virginia coasts, as well as on more than 30 wells in the Gulf of Mexico.Report Typo/Error
- Dow Jones Industrials21,080.28-2.67(-0.01%)
- S&P 500 INDEX2,415.82+0.75(+0.03%)
- S&P/TSX Composite15,416.930.00(0.00%)
- Crude Oil Front Month Futures$49.70-0.10(-0.20%)
- Royal Bank of Canada$93.920.00(0.00%)
- Canadian Imperial Bank of Commerce$105.370.00(0.00%)
- Toronto-Dominion Bank$64.250.00(0.00%)
- Agrium Inc$124.910.00(0.00%)
- Tiffany & Co$86.18+0.36(+0.42%)
- Updated May 26 4:00 PM EDT. Delayed by at least 15 minutes.