Canada Stocks Rally With Crude, Banks to Cap Second Weekly Gain

Updated on
  • S&P/TSX the top developed market this year up 3.9 percent
  • Global markets rebound as investors reassess ECB Stimulus

Canadian stocks rose, joining a rally in global markets as growing optimism on European stimulus overshadowed a surprise increase in Canada’s jobless rate.

The Standard & Poor’s/TSX Composite Index rose 1.1 percent to 13,522 at 4 p.m. in Toronto, to the highest since Dec. 1 while capping a second weekly increase. The resurgent S&P/TSX is one of the best-performing developed markets in the world this year, vying with New Zealand for the top spot as the only nations higher in 2016, while posting returns ahead of the U.S., Germany and U.K.

Global stocks rebounded from yesterday’s losses as investors reconsidered the aggressive stimulus package unveiled by European Central Bank President Mario Draghi Thursday that included lowered interest rates and increased bond purchases. Markets whipsawed after Draghi said in later comments the central bank is done with cutting borrowing costs for now.

Canada’s unemployment rate unexpectedly climbed to 7.3 percent in February, the highest since March 2013 as the nation continues to struggle with the impact of lower oil prices. Employers eliminated a net 2,300 jobs, Statistics Canada said Friday. Economists surveyed by Bloomberg had projected a 10,000-job increase and an unchanged jobless rate.

“Today’s report indicates continued flat employment growth which is contributing to a rise in the unemployment rate, though the bigger factor is stronger labor force gains,” said Paul Ferley, assistant chief economist at RBC Capital Markets, in a note to clients. Job losses in the natural resource industries, hard-hit by the collapse in crude prices of the past year, are being offset by gains elsewhere, Ferley said.

Canada’s equity benchmark has benefited from the recent rebound in commodities prices, from crude to copper and precious metals. The index has clawed back rapidly after entering a bear market in January. A slide in 2015 resulted in the worst annual performance since the financial crisis.

Shares in the Canadian gauge now trade at about 21 times earnings, roughly 18 percent more expensive than the valuation of the benchmark U.S. equity index, the Standard & Poor’s 500 Index, data compiled by Bloomberg show. 

Energy producers increased 1.7 percent as eight of 10 industries advanced in the broader S&P/TSX. Canada’s largest lenders rose, after halting a five-day rally Thursday. Royal Bank of Canada and Bank of Nova Scotia gained at least 1.1 percent. Raw-material and phone companies were the only laggards. BCE Inc. slipped 0.8 percent.

Suncor Energy Inc. and Canadian Natural Resources Ltd. rose at least 1 percent. Crude prices in New York added 1.7 percent for a fourth weekly gain, the longest winning streak since May, amid signs of rising U.S. fuel demand and easing crude production. Cenovus Energy Inc. jumped 4.7 percent after the stock was added to Goldman Sachs Group Inc.’s Americas conviction list.

Canadian National Railway Co. and Canadian Pacific Railway Ltd. gained at least 1.5 percent to boost the industrials group to a 1.6 percent gain, erasing a 1.2 percent drop yesterday.

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