Commodities lift S&P/TSX composite to start the month after a strong April

·4 min read

TORONTO — Strength in commodities helped push Canada's main stock index up by triple digits to start May after a record-setting month.

Monday's strong start was driven by weakness in the U.S. dollar, which benefits the materials and energy sectors.

"Almost 100 per cent of the return is coming from materials and energy and that's just on the back of pressure on the U.S. dollar," said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

The S&P/TSX composite index closed up 104.83 points to 19,213.16.

In New York, the Dow Jones industrial average was up 238.38 points at 34,113.23. The S&P 500 index was up 11.49 points at 4,192.66, while the Nasdaq composite was down 67.56 points at 13,895.12.

The U.S. dollar and bond yields were lower as Federal Reserve chairman Jerome Powell said Monday that monetary policy can't change while the economic recovery remains uneven, while New York Fed president John Williams added that improving data aren't yet strong enough for any major shifts in bank policy.

The materials and energy sectors led eight of the 11 major sectors on the TSX. The metals and mining group gained 3.6 per cent after gold recovered from a rough end to last week, silver rose 4.2 per cent and copper resumed its march higher.

The June gold contract was up US$24.10 at US$1,791.80 an ounce and the July copper contract was up 6.05 cents at almost US$4.53 a pound.

That helped nearly 30 materials company shares to gain at least four per cent with Silvercorp Metals Inc. up 12.1 per cent, Endeavour Silver Corp. up 10.5 per cent and MAG Silver Corp. 10.4 per cent higher.

Energy climbed 3.2 per cent on help from the U.S. dollar and statements from Europe about easing restrictions this summer for vaccinated tourists from outside the European Union.

"So that's going to result in some more demand for energy and possibly for an increase in flights," Archibald said in an interview, noting that Air Canada shares increased nearly three per cent on that news.

As COVID-19 vaccination rates continue to pickup, Canada's largest airline should get a lift from more Canadians thinking about vacationing this summer, he said.

The June crude oil contract was up 91 cents at US$64.49 per barrel and the June natural gas contract was up 3.5 cents at nearly US$2.97 per mmBTU.

The increase was helpful for producers in Canada's energy patch as MEG Energy Inc. shares rose 7.4 per cent, Imperial Oil was up 5.3 per cent and Crescent Point Energy Corp. was 4.1 per cent higher.

Increased demand for oil in Europe and other reopening jurisdictions will help to offset the impact from heavy COVID-19 infection rates in India, the world's third-largest energy user.

"To the extent that there is some kind of reopening, policies put in place … that would be very bullish for broader oil demand despite the fact that India is going to have a bit of a hiccup," Archibald said.

The Canadian dollar traded for 81.44 cents US compared with 81.40 cents US on Friday.

Real estate was also strong while health care, technology and utilities were laggards.

Cannabis producers Aphria Inc. lost 7.2 per cent and Canopy Growth Corp. fell 5.4 per cent to pull health care down 3.8 per cent on the day.

Shopify Inc. shares decreased 5.2 per cent to hurt the technology sector.

With the TSX up 10 per cent in the first four months of the year, the coming months could be choppy, especially for technology names that surged during lockdowns, said Archibald.

He said the second year of economic recoveries are usually a little bit more uneven and more volatile.

"You've done a year-and-a-half worth of returns in four months and so I think there's definitely some complacency in the environment but I do think the fundamentals still look good over the medium term but there's always risk of a potential market pullback."

This report by The Canadian Press was first published May 3, 2021.

Companies in this story: (TSX:EDR, TSX:MAG, TSX:SVM, TSX:SHOP, TSX:AC, TSX:APHA, TSX:WEED, TSX:MEG, TSX:IMO, TSX:CPG, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press