Canada’s main stock index rose to its highest level in more than 14 months yesterday as a surge in gold prices pushed up gold-mining shares. Shares of Barrick Gold led after the company said it had eliminated its fixed-price hedge book (they raised almost $6 billion a couple of months ago in order to eliminate the hedge book). The rally in gold-mining shares came as the price of gold shot to a record high, above $1,216 an ounce, on expectations of further weakness in the U.S. dollar. Investors are becoming more trustworthy and confident in the equity market. They have more confidence, the global economy is slowly getting better, the government is talking about removing stimulus and they believe that there is still more upside heading into the Christmas season (Santa Claus rally). Shares of fertilizer producer Potash was also a key contributor to overall gains after the company’s chief executive made bullish comments regarding North American demand for crop nutrients. The S&P/TSX composite index ended up 0.62%, at 11,779.73. Earlier it rallied as high as 11,802.43, its highest level since September 30, 2008.
Financials shares were little changed a day before earnings from National Bank, TD Bank, CIBC today and Royal Bank earnings are issued tomorrow while Scotiabank issues its earnings next week. It is expected that the stock market will be generally pleased with results after Bank of Montreal delivered a solid report last week that beat expectations and featured lower loan-loss provisions.
Tomorrow will be the release of November jobless figures, the U.S. ADP National Employment Report said that 169,000 private sector jobs were lost in November. While it represented another month-over-month decline in job losses, investors had been looking for a drop of 148,000. The current investment thesis will all fall apart if you don’t see some recovery in jobs. In short, one of the biggest headwinds facing a recovery is a lack of gains in the employment market. The ADP jobs report is often used as a gauge for Friday’s monthly unemployment report from the U.S. Labour Department. Economists estimate that Friday’s government non-farm payrolls report will show that 114,000 jobs were lost in the U.S. in November.
In the United States the Nasdaq rose as strong online holiday sales boosted shares of retailers, including Amazon.com, and relieved some concerns about the consumer. The Dow edged lower as falling oil prices prompted investors to sell energy shares, while the Standard & Poor’s index finished flat. Worries that bank profits could be hurt by derivatives legislation under consideration also curbed enthusiasm about the broader market. The Dow Jones industrial average dropped 0.18%, the Standard & Poor’s 500 Index advanced 0.03% while the Nasdaq Composite Index added 0.42%.
Shares of Bank of America Corp did rise after the closing bell as it said it has worked out a deal with the government to repay $45 billion in taxpayer bailout funds, known as Troubled Asset Relief Program (TARP) funds, by raising new capital. That data got Wall Street’s attention because weakness in the labor market is still a matter of concern. In other economic data, the Federal Reserve said in a report the weak U.S. economy is improving modestly with little upward pressure on wages and finished goods. The Federal Reserve’s overview of the economy was largely positive, but gave it little reason to move off from its ultra-low interest rates designed to stimulate growth. The Fed, in its Beige Book report, said eight of its 12 districts reported some pick-up in economic activity since the last report on October 21st.
Stocks are looking to open higher this morning with U.S. stock futures up about 0.50%, European shares up and commodity prices up.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
