Bay Street, Canada's financial district, is shown in Toronto on Wednesday, March 18, 2020. THE CANADIAN PRESS/Nathan Denette

S&P/TSX composite posts rebound as oil prices rise, while shine comes off gold

S&P/TSX composite posts rebound as oil prices rise, while shine comes off gold

TORONTO — Canada’s main stock index rebounded as higher crude oil prices powered the energy sector while a hawkish tone from the U.S. Fed took the shine off gold.

The S&P/TSX composite index closed up 32.54 points to 21,072.20.

In New York, the Dow Jones industrial average was down 170.64 points at 36,236.47. The S&P 500 index was down 4.53 points at 4,696.05, while the Nasdaq composite was down 19.30 points at 15,080.87.

Energy was the strongest sector on the TSX, rising three per cent with Vermilion Energy Inc. surging 9.2 per cent as crude oil briefly surpassed US$80 per barrel for the first time in a little more than seven weeks.

While an underinvestment supply has kept output in check, demand is picking up as the global economy is normalizing despite COVID-10 lockdowns, says Anish Chopra, managing director with Portfolio Management Corp.

“You’re at that inflection point where people are realizing it’s going to take years to get some of that oil supply, energy supply, back on, but the demand is there so the price of oil is reacting to that,” he said in an interview.

Holiday gasoline price savings are also dissipating due to short-term pressures such as unrest in Kazakhstan and output disruptions in Libya.

The February crude contract was up US$1.61 at US$79.46 per barrel and the February natural gas contract was down seven cents at US$3.81 per mmBTU.

The Canadian dollar traded for 78.49 cents US compared with 78.63 cents US on Wednesday.

Financials was helped by minutes from the Fed’s December meeting in which members supported an earlier withdrawal of stimulus and hike in interest rates.

Canadian bank shares appreciated as 10-year bond yields moved above 1.7 per cent on both sides of the border. Canadian Western Bank up 4.6 per cent, Laurentian Bank 2.3 per cent higher and CIBC rising 2.1 per cent.

The tone from the U.S. central bank was not good for technology and materials sectors, both of which lost ground.

Materials decreased 2.7 per cent, in part due to Stelco Holdings Inc. shares falling 10.3 per cent after the Hamilton steelmaker said shipments will be lower than previously forecast in the fourth quarter.

Pressure on the sector also came from lower gold prices as central banks prepared to tackle inflation.

The February gold contract was down US$35.90 at US$1,789.20 an ounce and the March copper contract was down 5.9 cents at US$4.35 a pound.

“Gold tends to be an inflation hedge among some of its other uses, so higher interest rates to offset inflation aren’t as good for gold,” Chopra said.

Tech dropped 1.2 per cent with Shopify Inc. suffering a third straight day of loses, down another 1.7 per cent on Thursday.

“For tech, they’ve certainly been the story of the last two years during COVID and their valuations reflect that. So to see their valuations come off from pretty high levels, it’s reasonable.”

This report by The Canadian Press was first published Jan. 6, 2022.


Ross Marowits, The Canadian Press