Canada’s most important stock index closed at its highest level in six months on renewed hopes of a U.S.-China trade deal and diminished fears of a downturn.
The S&P/TSX composite index gained 125.97 points to close at 16,574.81, its highest close since July 24 and less than 100 points off its record high.
U.S. markets also surged, outpacing the Toronto marketplace because technology firms had a strong day after the world’s two biggest economies announced they would meet again next month in Washington, D.C.
“So investors are welcoming this reprieve now and risk assets are rallying widely across both international equity markets but also commodities costs,” said Candice Bangsund, portfolio director for Fiera Capital.
Markets have rallied before only to have hopes dashed by a tweet.
It is reassuring that the two sides are continuing to speak and appear willing to come to a bargain despite imposing increased tariffs last weekend,” she said.
“The fact they are getting together face-to-face, which has sparked speculation that there may be some type of deal and obviously that has come as a relief for investors,” Bangsund stated in an interview.
“Our sense is that a deal will be done by year-end and this is a step in the right direction.”
The positive trade sentiment followed a de-escalation in political instability in Hong Kong and in London as lawmakers moved to block a no-deal Brexit.
Strong U.S. economic also diminished fears of a recession.
Personal payrolls increased by 195,000, exceeding expectations, ahead of Friday’s monthly non-farm payrolls report. The U.S. services sector also had its fastest growth last month since February, according to the Institute for Supply Management’s non-manufacturing purchasing managers index (PMI).
“The numbers that we saw today actually reinforced the fact that the U.S. market remains in amazing shape and that fears of downturn are largely misplaced,” Bangsund stated.
Strong financial statistics should prevent the Federal Reserve from cutting interest rates beyond 25 basis points in September, she added.
In New York, the Dow Jones industrial average ended up 372.68 points in 26,728.15. The S&P 500 index was up 38.22 points in 2,976.00, while the Nasdaq composite was up 139.95 points in 8,116.83.
The Canadian dollar traded for a mean of 75.60 cents US compared with an average of 75.40 cents US on Wednesday.
Eight of the 11 big sectors on the TSX closed higher in a broad-based rally led by medical care. It gained 3.7 percent as Canopy Growth Inc. surged 7.4 percent after incoming CEO Mark Zekulin said the mood in the cannabis manufacturer has”never been better,” two weeks after co-founder Bruce Linton was ousted in the job.
Energy was up 2.65 percent higher as Cenovus Energy Inc. climbed almost five percent. Crude oil prices rose early in the day on commerce optimism but faded after a weekly report showed an increase in U.S. crude stockpiles.
The October crude contract settled up four cents at US$56.30 per barrel and the October natural gas contract was down 1 cent at US$2.44 per mmBTU.
Tech and industrials were also more powerful while the heavyweight financials industry rose 1.4 percent led by IGM Financial Inc. and National Bank of Canada as bond yields moved higher.
Materials dropped 2.5 percent with Centerra Gold Inc. and First Majestic Silver Corp. falling more than nine percent as gold dropped from its six-year high. The December gold contract was down US$34.90 in US$1,525.50 an ounce and the December aluminum contract was up 4.7 cents at US$2.64 per pound.