TORONTO — North American markets were soaring Thursday in the wake of a rebound on China’s main market and a report showing the U.S. economy expanded at a much faster pace than previously estimated in the second quarter.
The positive news had a major spillover effect on commodity markets, sending oil and base metals prices skyrocketing and providing a major boost to the resource-heavy Toronto Stock Exchange.
In afternoon trading, the S&P/TSX composite index was up 354.18 points or 2.65 per cent at 13,735.77 as investors bought up stocks beaten down in the six-day slide that began last week by fears over a slowdown in China’s economy.
In New York, the Dow Jones industrial average was up 195.75 points or 1.20 per cent at 16,481.26 after a more than 600-point jump Wednesday, its third-biggest point gain of all time and largest since October 2008. The broader S&P 500 index rose 32.76 points to 1,973.27 and Nasdaq gained 80.68 points to 4,778.21.
“It looks to be more buying on depressed valuations,” said Tim Dreiling, senior portfolio manager at the Private Client Reserve at U.S. Bank. “Capital comes back in, finding valuations to be more favourable than a week ago.”
Benchmark oil, which has been slumping badly, rose $3.62 or more than nine per cent to US$$42.22 a barrel, while October natural gas lost four cents to US$2.66 per thousand cubic feet.
Copper also reversed its slide, with the September contract shooting up seven cents to US$2.32 a pound. December gold retreated $2.40 to US$1,122.20 an ounce.
The loonie, which tends to respond to changes in oil prices, was higher, up 0.60 of a cent at 75.66 cents U.S.
It also benefited from a weakening of the greenback after comments Wednesday by William Dudley, president of the New York Federal Reserve Bank, that the case for a U.S. interest rate hike in September is now “less compelling” given China’s troubles, low oil prices and emerging markets weakness.
Thursday’s good news began in China, where the Shanghai index posted its biggest gain in eight weeks, rising more than two per cent. It was the sell-off on China’s main market, which wiped out nearly 23 per cent off its value over the past week, that raised concerns over the strength of the Chinese economy, the world’s second largest, triggering worldwide selling.
Also cheering markets was a U.S. Commerce Department report that showed gross domestic product expanded at an annual rate of 3.7 per cent in the April-June quarter.
That was much higher than the initial estimate of 2.3 per cent and a big improvement over the 0.6 per cent advance in the first quarter and an indication that world’s largest economy was on solid footing heading into the second half of the year.