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North American stock markets bounce back on signal China open to partial deal

TORONTO — North American stock markets bounced back from two days of losses on signals that China is open to a partial trade deal despite some aggressive U.S. moves ahead of talks on Thursday.
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TORONTO — North American stock markets bounced back from two days of losses on signals that China is open to a partial trade deal despite some aggressive U.S. moves ahead of talks on Thursday.

Stock market activity Wednesday was reflective of the last seven to eight months of back and forth action, said Mike Archibald, Associate Portfolio Manager with AGF Investments Inc.

"There's no real sustainable direction either way," he said, noting that Canada's main stock index has been within a narrow trading range over the last seven months after gaining 12 per cent in January and February.

Large cap stocks and defensive parts of the market have both been favoured in a sign of nervousness about the future, he said in an interview.

"Until we get a breakout or breakdown in one direction or the other it looks like this kind of back and forth type of market action is likely to continue."

Equity markets rose on the day in lockstep with the direction of bond yields.

That's a reversal from losses Tuesday on news about the U.S. repealing Chinese travel visas and delisting Chinese artificial intelligence companies.

"So today I think people are calming down a little bit and hoping for a little bit better action on the trade file, which we should start to get some news leaking out probably later today or tomorrow."

Market sentiment moved higher on a report that China is open to a partial deal. That's mostly around things the two sides have already agreed to, including more agricultural purchases by China, said Archibald. However, the main sticking points remain unresolved, including intellectual property transfers and how to enforce a deal.

"This information has been out there and so it shouldn't really come as new news to investors, although it does seem like everybody is hyper-sensitive to whatever comes out on the China trade file, hour by hour."

The S&P/TSX composite index closed up 85.92 points at 16,379.87.

In New York, the Dow Jones industrial average was up 181.97 points at 26,346.01. The S&P 500 index was up 26.34 points at 2,919.40, while the Nasdaq composite was up 79.96 points at 7,903.74.

The Canadian dollar traded for an average of 75.05 cents US compared with an average of 75.06 cents US on Tuesday.

Eight of the 11 major sectors of the TSX closed higher, led by industrials, technology, consumer discretionary and financials.

Higher bond yields helped the heavyweight financials sector gain 0.65 per cent with Power Financial Corp. and Brookfield Asset Management gaining 1.6 and 1.4 per cent respectively and the Canadian Imperial Bank of Commerce up 1.2 per cent.

Canada's technology sector followed the U.S. with Blackberry Ltd. and CGI Group Inc. closing higher.

Materials and energy sectors were down a bit with Goldcorp Inc. falling 1.6 per cent and Crescent Point Energy Corp. off 2.7 per cent.

The December gold contract was up US$8.90 at US$1,512.80 an ounce and the December copper contract was unchanged at US$2.57 a pound.

The November crude contract was down four cents at US$52.59 per barrel and the November natural gas contract was down 5.4 cents at US$2.23 per mmBTU. Crude oil prices fell despite U.S. stockpiles growing beyond expectations by adding 2.9 million barrels as oil production hit a record 12.6 million barrels per day last week.

Gold prices rose on expectations that the U.S. Federal Reserve would cut interest rates again later this month.

Minutes from last month's Fed meeting released Wednesday showed officials were divided on cutting rates in September amid increased uncertainty about trade tensions, suggesting that future rate cuts remain uncertain.

However, chairman Jerome Powell's comments in the past couple of days has been "significantly more accommodative" than last month, added Archibald.

 

This report by The Canadian Press was first published Oct. 9, 2019.

Companies in this story: (TSX:GIB.A, TSX:BB, TSX:PWF, TSX:BAM.A, TSX:CM, TSX:G, TSX:CPG, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press



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