Canadian stocks clawed their way into the green, snapping a six-day losing streak as expectations mounted central banks would cut interest rates to flight the growing impact of the coronavirus.
The S&P/TSX Composite Index rose about 0.8 per cent to 16,382.02 at 11:21 a.m. in Toronto, buoyed by gains in telcos, utilities and real estate. BCE Inc. gained about 1.1 per cent and Brookfield Renewable Partners added 3.3 per cent. Energy stocks fell despite oil rebounding from its worst week since 2008.
The S&P 500 pushed to session highs after news that Group of Seven finance ministers and bankers plan to hold a teleconference Tuesday to discuss how to respond to the outbreak. Tech shares led gains after central banks from Japan to England earlier joined the Federal Reserve in promising action as warranted.
The two-year Treasury yield sank through its 2016 lows and 10-year rates fell below 1.10 per cent. Oil rallied on expectations that the OPEC+ alliance will deepen output cuts.
You can’t turn off the second largest economy in the world, the fastest growing one, and not have some ramification
John Zechner, president of J. Zechner Associates
Group of Seven finance ministers plan to hold a teleconference on Tuesday to discuss their response to the threat posed by the outbreak, according to people familiar with the matter, who spoke on condition of anonymity. The nations’ central bankers will also join the call. Meanwhile speculation is growing the Bank of Canada will cut interest rates at its announcement on Wednesday, and perhaps by 50 basis points.
“You can’t turn off the second largest economy in the world, the fastest growing one, and not have some ramification,” John Zechner, president of J. Zechner Associates in Toronto. Positioning in the market was very bullish, so when the virus began to spread and earnings warnings came, the market started to experience some impact, he said.
Zechner said he’s been net short the company’s hedge fund for a while, with valuations high and driven by a low-interest rate environment. However, he said he did some buying this morning.
Meanwhile, there’s “still too many bulls” in the market, National Bank of Canada’s technical analyst Dennis Mark said in a note to clients. “Strong downside momentum in this market suggests that it will take time to exhaust and play out.”
The rally follows an 8.9 per cent drop in the benchmark last week, marking the worst week for Canadian stocks since the financial crisis in late 2008.
- Western Canada Select crude oil traded at a $12.75 discount to West Texas Intermediate prices
- Spot gold added 0.7 per cent to $1,595.95 an ounce
- The Canadian dollar strengthened 0.2 per cent to C$1.3384 per U.S. dollar
- The 10-year government bond yield fell 7 basis points to 1.061 per cent