North American stock markets rise on U.S. rate cut hopes, gold moves higher

North American stock markets rise on U.S. rate cut hopes, gold moves higher
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TORONTO — North American stock markets continued to rise on anticipation of U.S. interest rate cuts, sending gold prices to a three-and-a-half month high while oil prices plummeted.

The trajectory is a continuation of Tuesday’s large increase, except for oil, that’s got stock market bulls happy, says Michael Currie, vice-president and investment adviser at TD Wealth.

“It’s not unusual after a huge day like yesterday to see a little bit of profit-taking the next day, so the mini-rally continues,” he said in an interview.

The S&P/TSX composite index closed up 46.42 points to 16,212.66, after gaining 150.35 points on Tuesday.

In New York, the Dow Jones industrial average was up 207.39 points at 25,539.57. The S&P 500 index was up 22.88 points at 2,826.15, while the Nasdaq composite was up 48.36 points at 7,575.48.

Wednesday’s gains came a day after markets bounced back with their second best day of the year after the Federal Reserve signalled possible interest rate cuts to address trade challenges and a slowing economy.

Nine of the 11 major sectors of the TSX were higher, led by a 2.65 per cent increase for technology as Shopify Inc. rose 6.6 per cent.

A nearly 10-per-cent growth in Bombardier shares following confirmation that it is in talks to sell its regional jet business pushed up the industrials sector.

The key energy sector fell 2.58 per cent as several large producers suffered sharp share decreases, including Crescent Point Energy Corp and Encana Corp, which fell 7.22 and 6.5 per cent respectively.

The sector suffered as crude oil prices hit their lowest level in nearly five months with the July crude contract losing US$1.80 at US$51.68 per barrel. The July natural gas contract was down 3.8 cents at US$2.38 per mmBTU.

Crude prices decreased following a weekly U.S. report that showed inventory stockpiles increased by 6.8 million barrels, well above an expected decrease of 850,000 barrels. The large swing was unusual because demand is still pretty decent, said Currie.

“A lot bigger inventories mean people think that economic activity is slowing and again when the Fed says we’re looking at rate cuts also gets people thinking the same thing. So all those put a big push down on oil.”

Materials also lost some ground even though gold prices rose to their higher level since February.

The August gold contract was up US$4.90 at US$1,333.60 an ounce while the July copper contract was down 4.6 cents at US$2.62 a pound.

The Canadian dollar traded at an average of 74.62 cents US compared with an average of 74.55 cents US on Tuesday.

The stock market gains came despite an ADP jobs report in the U.S. that confirmed a slowing economy by indicating private sector hiring added just 27,000 jobs in May, the fewest in nine years.

“So that got people concerned. The economy is slowing which in a strange way is what people want to see.”

Companies in this story: (TSX:SHOP, TSX:CPG, TSX:BBD.B, TSX:ECA, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press


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