The Canadian stock market advanced sharply yesterday as the financial sector helped send the Toronto stock market up after 4 of the big Canadian banks posted their quarterly earnings reports that beat expectations. Toronto’s S&P/TSX composite index advanced 2.5% with key support also coming from the energy sector which was up 3.5% as signs of higher oil demand pushed crude prices higher. July crude oil contract on the New York Mercantile Exchange rose $1.63 cents to US$65.08 a barrel (over $66 this morning with gold above $970) as U.S. government data showed a surprise drop in last week’s crude inventories.
Also, OPEC decided to maintain current production levels unchanged at the end of the cartel’s meeting in Vienna. They said they are already seeing an increase in demand which is very encouraging for higher oil prices and higher stock prices. In addition, some of the economic numbers lends to itself that crude, over the long period, is going to go higher.
Stock markets have suddenly jumped as they have lost their fear of depression and are looking ahead to an economic recovery. Investors see the economy reviving before year-end, but some argue that the rally looks a little early and more vigorous than what we typically see when there’s only limited evidence of a turning point (number of green shoots).
In the United States stocks climbed as higher oil prices drove up energy shares and falling yields in the bond market eased concerns that higher borrowing costs would hinder economic recovery. The Dow Jones industrial average jumped 1.25%, the Standard & Poor’s 500 Index jumped 1.54% and the Nasdaq Composite Index jumped 1.20%.
Thursday’s economic data was mixed, with new orders for durable goods seeing their biggest gain in 16 months, while new home sales rose slightly less than expected. In the U.S., indexes lifted after solid demand at a Treasury auction eased fears that the appetite for U.S. debt would dry up and force the government to pay higher interest rates to attract investors. That in turn could endanger an economic recovery by driving borrowing rates higher for governments, business and consumers.
The Commerce Department reported that U.S. home sales rose 0.3% cent in April to a seasonally adjusted annual rate of 352,000, which was lower than expectations. The median sales price fell to US$209,700, a 14.9% drop from a year earlier. Sales were down 34% cent from April 2008. General Motors said a committee of bondholders has agreed to a sweetened deal proposed by the U.S. government to erase the automaker’s unsecured debt in exchange for company stock. In addition to the 10% of the stock in a newly formed GM that was originally rejected by bondholders, the new offer would give them warrants to acquire an additional 15% cent stake at a deep discount. That would come only if they agree to support selling the company’s assets to a new company under bankruptcy court protection. But it’s still expected GM will seek creditor protection Monday.
All interesting but things are looking better and things are looking like stock markets will finish the week strong.
