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What the oil, loonie and stock rallies mean for Canada

Some key economic indicators – oil, currencies and stocks – are pointing upward today, with potential impact on Canada's oil patch and other sectors.

Oil

Brent oil futures climbed above the psychologically important $50 (U.S.)-a-barrel mark Thursday, the first time in almost 7 months. The price of crude hit a 12-year low of just over $26 per barrel in February.

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The price of oil has been on a roll recently on an easing of supply due to the wildfires in Canada's oil sands region, terrorist attacks in Nigeria, unrest in Libya, falling U.S. stockpiles and other factors.

Observers say that a price above $50 – should it hold – could be a major factor in prompting producers to restart operations that were put on hold. In Canada, of course, oil and gas producers are just playing catchup with the gradual restart of oil-sands operations that were forced to shut down several weeks ago due to the wildfire threat.

A stronger oil price nonetheless represents a potential added impetus to Canadian producers to get more projects back on line, with the resulting increase in investment and jobs.

On the other hand, sustained higher oil prices could result in a dampening of investment and production in Canada's manufacturing heartland.

Dollar

Helped by strengthening oil prices, the Canadian dollar has moved above the 77-cent (Canadian) mark.

The loonie has also benefitted from the Bank of Canada's positive outlook for the economy going forward.

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Canada's dollar is among energy-sensitive currencies – the Norwegian krone is another – that are outperforming so far today against the U.S. greenback.

A rising loonie is bad news for Canadian exporters but represents a potential boon for companies prepared to capitalized on a stronger dollar by investing in innovation and productivity, according to many economists.

Stocks

Global markets, such as London, Frankfurt and Paris, are higher so far today with signs that the Toronto Stock Exchange and U.S. exchanges are also in upswing mode.

Canadian second-quarter bank earnings to date are fairly solid and energy companies are expected to get a boost from the positive outlook on oil prices.

The S&P/TSX Composite Index climbed 100.89 points on Wednesday to close above 14,000, a first since August.

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Signs of a turning tide could bring a little love Canada's way, Bank of Nova Scotia economist Derek Holt says.

"We've argued for a long time that the hate-on applied to Canada from abroad fundamentally misunderstands the market and presents opportunities to domestic investors," he wrote in a research note.

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