TORONTO — Canada’s main stock index recovered from early losses Thursday as increased crude oil prices propelled the energy sector and loonie higher.
The S&P/TSX composite index gained 33.48 points to 17,593.34 after falling by more than 100 points below Wednesday’s close.
The move up followed Brent oil prices surpassing the psychological level of US$50 per barrel and West Texas Intermediate closing at its highest level in more than nine months.
The January crude contract was up US$1.26 at US$46.78 per barrel and the January natural gas contract was up 11.1 cents at US$2.55 per mmBTU.
The energy sector climbed four per cent on the day as oil producer shares rose as much as 9.9 per cent. Vermilion Energy Inc. was up 8.5 per cent, followed by Whitecap Resources Inc. and MEG Energy Corp. at 6.9 and 6.8 per cent, respectively.
The movement in oil prices is really good for Canada after a wild year that saw prices plunge, said Greg Taylor, chief investment officer of Purpose Investments.
“We’re starting to see people that just had ignored them and said they’ll never buy oil stock again … come back saying I need to get back into this,” he said in an interview.
“And I think that’s a pretty big positive for the Canadian market and it should set up well for 2021.”
COVID-19 vaccines have buoyed confidence that the global economy will recover and push oil demand higher as people resume travelling.
Higher prices is good for a lot of energy companies and investors who had written off these companies being able to return the profitability.
“The fact that we’re seeing it happen this quickly, I think is a is a huge positive,” Taylor added.
Oil companies are also doing “a lot of good things” of late, including some mergers and acquisitions such as Whitecap Resources Inc.’s friendly $550-million all-stock deal Wednesday to buy rival TORC Oil & Gas Ltd.
The Canadian dollar traded for 78.53 cents US, the highest level since May 2018 and compared with 78.11 cents US on Wednesday.
“I don’t think it’s going to run away by any stretch, but it certainly feels like the macro backdrop is looking more favourable for the Canadian dollar,” Taylor said..
In New York, the Dow Jones industrial average was down 69.55 points at 29,999.26. The S&P 500 index was down 4.72 points at 3,668.10, while the Nasdaq composite was up 66.86 points at 12,405.81.
Nasdaq recovered from Wednesday’s one-day selloff while the other two U.S. markets were lower as U.S. stimulus talks remained unresolved and U.S. jobless numbers increased to 853,000 last week, above expectations.
The weak employment benefits numbers caused some market jitters in the morning, but could be a catalyst to getting politicians to agree to a new stimulus package, even if it is smaller than some had expected.
Consumer staples lost the most ground as Empire Co. Ltd. was down 3.2 per cent after missing analyst expectations despite reporting higher profit and sales in its fiscal second quarter.
Materials fell 0.76 per cent on a drop in gold price, despite higher copper prices.
The February gold contract was down US$1.10 at US$1,837.40 an ounce and the March copper contract was up 6.25 cents at nearly US$3.58 a pound.
“When you’re seeing oil do better, copper do that [too] I think is a testament to what makes the Canadian economy do better,” said Taylor. “And that’s where people are getting a little more optimistic.”
This report by The Canadian Press was first published Dec. 10, 2020.
Companies in this story: (TSX:VET, TSX:WCP, TSX:MEG, TSX:EMP.A, TSX:TOG, TSX:GSPTSE, TSX:CADUSD=X)
Ross Marowits, The Canadian Press