North American stock markets climb to record highs on signals of trade truce

TORONTO - North American stock markets all climbed to record highs Friday on low bond yields and positive signals of a trade truce between the world's two largest economies.

"It's just investors getting the best of both worlds -- low interest rates combined with optimism on trade," said Patrick Blais, senior portfolio manager at Manulife Asset Management.

The stock markets ended a positive week higher after senior U.S. officials, including National Economic Council director Larry Kudlow, said it is on the path to a trade agreement with China.

The comments Friday came a day after published reports suggested the two countries faced roadblocks to the first phase of a trade agreement.

"I think it's the pronouncement and the optimism on trade that's really what we think has caused the bounce up today in reaching new highs," Blais said in an interview.

The S&P/TSX composite index closed up 56.29 points at 17,028.47, breaking the 17,000 threshold for the first time and hitting an intraday record of 17,035.96.

In New York, the Dow Jones industrial average was up 222.93 points at 28,004.89. The S&P 500 index was up 23.83 points at 3,120.46, while the Nasdaq composite was up 61.81 points at 8,540.83. All three closings set record highs.

Blais said investors are ignoring weak data by being hopeful and optimistic.

U.S. manufacturing output tumbled 0.6 per cent last month, the Federal Reserve said Friday, largely because production of cars and auto parts plunged 7.1 per cent amid the GM strike. The drop in factory production was the biggest since April. The GM strike ended late in October.

Overall industrial production -- which includes factories, utilities and mines -- fell 0.8 per cent, the biggest drop since May 2018 and below expectations. Industrial output is down 1.1 per cent from October 2018.

"They have been retrenching, investing less so this just kind of confirms that manufacturing is in a slowdown and we do need trade to be resolved and business confidence to come back and for companies to invest to drive the economy forward," Blais said.

Meanwhile, retail sales rose 0.3 per cent in October, rebounding from a 0.3 per drop the previous month. Sales increased 3.1 per cent compared with a year ago, according to the Commerce Department.

But spending in restaurants and bars fell 0.3 per cent, the biggest drop in almost a year. Clothing stores reported a sharp one per cent drop in sales, while furniture, home and garden, and electronics and appliances stores all reported declines.

The Canadian dollar traded for 75.58 cents US compared with an average of 75.43 cents US on Thursday.

Eight of the 11 major sectors on the TSX were higher, led by energy which gained 1.4 per cent as trade optimism boosted crude oil prices. Imperial Oil and Cenovus Energy Inc. were up 2.9 and 2.4 per cent respectively.

The December crude contract was up 95 cents at US$57.72 per barrel and the December natural gas contract was up 4.1 cents at US$2.69 per mmBTU.

The materials sector was unchanged even though gold prices fell.

The December gold contract was down US$4.90 at US$1,468.50 an ounce and the December copper contract was up 1.65 cents at US$2.64 a pound.

Health care fell 2.8 per cent on large share losses by several cannabis producers.

Aurora Cannabis Inc.'s shares sank more than 18 per cent to a two-year low after its revenues missed expectations and the pot producer announced it was halting or delaying construction of two production facilities to save over $190 million in planned expenses.

The Green Organic Dutchman Holdings Ltd. was down 15.7 per cent following a $20.1 million third quarter loss, a $11.3 million increase in losses from the same quarter last year as costs rose from its expansion towards commercial production.

This report by The Canadian Press was first published Nov. 15, 2019.

Companies in this story: (TSX:TGOD, TSX:ACB, TSX:IMO, TSX:CVE,TSX:GSPTSE, TSX:CADUSD=X)

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