Investor relief sends North American stock markets to record intraday highs

TORONTO - Relief about a reduced risk of war in the Middle East sent North American stock markets to new highs Thursday.

Markets returned to a risk-on mode after a couple of days of volatility over concerns that the U.S. drone killing of a top Iranian general would result in an all-out conflict between the adversaries, says Candice Bangsund, portfolio manager for Fiera Capital.

"Essentially a sense of calm has come over the marketplace," she said in an interview.

"Investors are breathing a sigh of relief because tensions between the U.S. and Iran have de-escalated in the last day or so and the measured response from both Iran and the U.S. has reduced the chances of a full-blown military conflict."

Investors also welcomed news that China's vice premier is expected to be in Washington, D.C., next week to sign the Phase 1 trade agreement with the U.S.

The S&P/TSX composite index closed up 67.75 points at 17,235.57 after peaking at 17,255.51 in earlier trading.

U.S. stock markets also set new intraday highs.

In New York, the Dow Jones industrial average was up 211.81 points at 28,956.90. The S&P 500 index was up 21.65 points at 3,274.70, while the Nasdaq composite was up 74.19 points at 9,203.43.

The Canadian dollar traded for 76.46 cents US compared with an average of 76.77 cents US on Wednesday. The U.S. greenback appreciated after U.S. private payrolls increased beyond expectations in December to demonstrate the continued strength of the American economy, said Bangsund. The U.S. and Canada will release monthly jobs reports on Friday.

The TSX was boosted by a broad-based rally with nine of the 11 major sectors rising.

Health care and technology both gained about two per cent. Shares of Shopify Inc. increased three per cent and followed gains in the U.S. as Apple Inc. hit a record high after iPhone sales in China increased 18 per cent in December.

Energy was also higher despite crude oil prices falling with Canadian Natural Resources up 2.3 per cent. Prices are down about four per cent this week on concerns about potential supply disruptions in the Middle East.

The February crude contract was down five cents at US$59.56 per barrel and the February natural gas contract was up 2.5 cents at US$2.17 per mmBTU.

The de-escalation in geopolitical tensions has pushed West-Texas Intermediate prices below US$60 per barrel. Bangsund expects WTI prices could hover around that level but should increase to around US$70 per barrel in 2020.

"While cooler heads have prevailed for now, of course these are volatile situations that could re-emerge at any time," he said.

"For now $60 is a good benchmark for where oil should be and we'll likely see it hover around that until we get more clarity on the geopolitical and the growth backdrop in 2020."

Consumer discretionary climbed with shares of Aritzia Inc. rising nearly 17 per cent to an all-time close of $24.01 after the Vancouver fashion retailer reported a strong third quarter with profits rising on a 10 per cent increase in revenues.

Materials and telecommunications were the sole losing sectors on the day. Materials dropped as investors moved away from safe havens with First Quantum Minerals Ltd. down 2.9 per cent. The February gold contract was down US$5.90 at US$1,554.30 an ounce and the March copper contract was down one cent at US$2.80 a pound.

This report by The Canadian Press was first published Jan. 9, 2020.


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