Energy helps lift S&P/TSX composite higher as oil climbs, loonie up

·3 min read

TORONTO — Canada’s main stock index rebounded Monday as investors continued to watch for hints from the U.S. Federal Reserve on whether it will make a formal decision this week about a possible scaling back of its bond buying program.

"There was quite a positive snapback in risk sentiment today,” said Erik Bregar, head of currency strategy at the Exchange Bank of Canada, adding the Canadian dollar rallied Monday from an eight-month intraday low reached in last Friday’s trading against the U.S. greenback.

"All the risk-sensitive currencies are rallying today — Canadian dollar, Aussie dollar, (British) pound sterling, that sort of thing.”

The S&P/TSX composite index was up 138.24 points at 20,477.26. U.S. markets also climbed Monday — in New York, the Dow Jones industrial average was up 215.63 points at 35,335.71, while the S&P 500 index was up 37.86 points at 4,479.53. The Nasdaq composite was up 227.99 points at 14,942.65.

The Canadian dollar traded for 78.85 cents US compared with 77.78 cents US on Friday.

The gains are a change from last week’s losing streak, during which the S&P/TSX suffered six straight sessions of losses before ticking up slightly on Friday.

Last week, investors appeared spooked by the possibility that the U.S. Federal Reserve might announce a planned tapering of its bond buying program at its upcoming annual conference in Jackson Hole, Wyo. this Friday. Those jitters intensified when minutes were released from the U.S. Federal Reserve gathering in July, which indicated the central bank could make a formal decision on whether to scale back pandemic emergency relief programs by year-end.

However, on Monday, the Federal Reserve announced its Jackson Hole conference scheduled for later this week will be held virtually, instead of in-person. Bregar said the decision sparked speculation about how seriously the central bank may view the risk of the Delta variant, which in could influence the timeline of its tapering plan.

"Lots of little things are in play here, but for the time being, it just seems like overall, investors are saying, 'Hey, maybe (Federal Reserve chair Jerome) Powell might not do anything on Friday,' " Bregar said. "That's what it feels like to me if you look at today's price action."

Energy stocks climbed Monday on gains in the price of crude, which had fallen to its lowest level since May on Friday. The October crude oil contract was up US$3.50 at US$65.64 per barrel on Monday and the October natural gas contract was up nine cents at US$3.96 per mmBTU.

Oil is vulnerable to negative headlines about COVID-19, as lockdowns anywhere on the globe have a significant impact on fuel demand. After rising to a seven-year high in July as countries loosened public health restrictions, news about surging cases of the Delta variant in North America and around the world dragged oil down again last week.

Bregar characterized Monday's rebound in the price of crude as nothing more than a correction.

“I think oil was a bit oversold last week ... whenever we see the stock market rip, or the U.S. dollar fall like it is today, it’s kind of a nice recipe for an oil rally," he said. "I don't think we can read much more into it than that.”

The December gold contract was up US$22.30 at US$1,806.30 an ounce and the September copper contract was up 10 cents at US$4.24 a pound.

This report by The Canadian Press was first published Aug. 23, 2021.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)

Amanda Stephenson, The Canadian Press

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