Canada’s main stock market rose for a 5th day yesterday, lifted by a rally in the energy and materials sectors as investors bet the global economy may be set to turn around and commence a sustainable recovery. The upbeat optimism and mood helped push the index to its highest level since mid October 2008. Gold closed near a 14 month high above $1,020 per ounce as the U.S. dollar fell to a 2009 low and investors bought the precious metal as a hedge against potential long-term inflation.
The S&P/TSX composite index ended up 0.52% at 11,555.60 with 7 out of the 10 sectors advancing on the day. In short order we have gone from a ‘selling market’ to a ‘buying market’ as investors quickly allocate a greater portion of their current assets to stock markets.
Oil prices rose above $72, finishing up more than 2% after data showed U.S. crude inventories fell more than expected last week, indicating higher demand and less supply. The gain came after the U.S. Energy Information Administration (IEA) reported that commercial crude oil inventories dipped last week by 4.7 million barrels, against expectations of a 2.4-million-barrel drop. The U.S. Commerce Department said retail sales climbed 2.7% in August after declining 0.2% in July. It was the biggest monthly advance since January 2006 and well above expectations on Wall Street for a 2% increase. Oil also got a boost from weakness in the U.S. dollar, which hit a 1 year low against a basket of currencies as investors turned to riskier assets. An OPEC delegate wrote in a Kuwaiti newspaper that the Organization of the Petroleum Exporting Countries (OPEC) might need to cut its oil supply next year to match an expected fall in demand for the group’s crude.
In the United States stock markets rose for a 3rd day hitting fresh 2009 highs in a broad based stock market rally following economic data that suggested a stronger than anticipated global recovery. Energy and manufacturing companies were among the strongest, benefiting from data indicating improved industrial demand and a falling dollar, which makes American exports more competitive in world markets. U.S. industrial output advanced for a second consecutive month in August. The economic data added to optimism about a recovery, a day after Federal Reserve Chairman Ben Bernanke said the recession was “very likely” over.
The Dow Jones industrial average gained 1.12%, the Standard & Poor’s 500 Index gained 1.53% and the Nasdaq Composite Index gained 1.45%. The benchmark S&P index is now up 58% since hitting 12-year lows in early March and is up 18% since the start of the year.
As mentioned U.S. industrial production rose for a 2nd straight month, reinforcing views that the recession had ended. A separate report showed confidence among U.S. homebuilders this month jumped to its highest level since May 2008. A Reuters survey of economists forecast solid U.S. economic growth in the current quarter after 4 quarters of decline. It put growth at a 3% annual rate, up from the 2.4% pace predicted in an August survey. The recovery from the deepest downturn since the 1930s is being driven by factories ramping up production as companies seek to rebuild depleted inventories. The improved confidence among homebuilders was further evidence that the housing market was stabilizing. Home building has been supported by the government’s tax credit for 1st time buyers and the ‘cash for clunkers’ program also had a material difference. Restoring and maintaining stability in the housing market is critical for economic growth.
Stock futures pointed to a higher open this morning and European shares rose early in the day this morning extending yesterday sharp gains as renewed hopes of a global economic recovery increased investor demand for riskier assets like equities.
