Canada’s main stock index advanced yesterday but “pared” early gains, touching its highest level in nearly 14 months as an early rally in oil prices powered energy stocks, while financials gained ground ahead of bank earnings reports. Despite a late retreat by oil prices which ended marginally higher after being up as much as $2 a barrel the energy sector still advanced by 0.71%. Financials gained 0.51% as investors hoped the upcoming 1st quarter results for the banks would show the continued mending of the sector. BMO will kick off the earnings today.
The S&P/TSX composite index rose 0.39%, to finish at 11,624.02. Earlier in the day it climbed as high as 11,737.84, its highest level since October 1, 2008. This Thursday is U.S. Thanksgiving and this Friday is Black Friday which officially kicks-off the Christmas shopping season and it could lead to a “Santa Claus rally” in stock markets. Gold prices extended their record run pushing above $1,160 an ounce and giving the sector a modest advance (see below).
In the United States stocks snapped a 3-day losing streak as stronger-than-expected home sales data fueled optimism while a weaker dollar boosted commodity-linked stocks. Sales of previously owned U.S. homes rose to their highest level in more than 2 ½ years last month. That helped to ease concerns about the sector generated last week when another report showed housing starts fell sharply in October. Stocks rallied broadly, with all 10 S&P sectors showing strong gains.
The Dow Jones industrial average gained 1.29%, the Standard & Poor’s 500 Index gained 1.36% and the Nasdaq Composite Index gained 1.40%. The U.S. dollar fell 0.7% against major currencies after St. Louis Federal Reserve President James Bullard said on Sunday that the Fed should extend its mortgage-related assets purchase program. The comments fueled expectations that interest rates would remain low for an extended period.
Sales of previously owned U.S. homes jumped last month to their highest level in more than 2 ½ years, but a fall in an economic gauge was a reminder that recovery from recession would be fragile and slow. Sales of existing home sales surged to a record 10.1% month-over-month in October, the National Association of Realtors (NAR) said, as buyers rushed to take advantage of a popular tax credit for 1st time home buyers that had been scheduled to end this month. The housing numbers easily topped market expectations and shows that home buyers are willing to buy under the right circumstances. Analysts are cautiously hoping a sustained housing market recovery will help improve the psychology of households, which has been shaken by an unemployment rate of 10.2%, the highest in 26 ½ years.
Currently, investors are fearful that that the economic recovery that started in the 3rd quarter may lose some momentum once government stimulus wanes, given the high unemployment that is crimping consumer spending. However, housing stability will provide a much needed floor to the overall economy.
Gold scaled a record high at $1,173.50 an ounce as a weaker dollar boosted buying in gold as a hedge against depreciation of paper currencies. Expectations of prolonged low U.S. interest rates also supported bullion’s investment demand. The precious metal has rallied to a series of record highs since news that India bought 200 tons of gold from the IMF broke in early November. Since then a number of other central banks have announced they are buying gold as well. Weakness in the U.S. dollar boosts gold’s appeal as an alternative asset and makes U.S. dollar-priced commodities cheaper for holders of other currencies.
U.S. stock-index futures rose and European shares were flat this morning as German business confidence climbed to a 15-month high and economists said the U.S. housing slump is leveling out. Commodity prices are up this morning with the exception of oil which is down marginally.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
