S&P/TSX composite joins U.S. markets rallying while loonie marches higher

Ross Marowits
·4 min read

TORONTO — Canada's main stock index had its best performance in five months Thursday as it joined U.S. investors who continue to bask in the glow of expected post-election gridlock.

President Donald Trump and Democratic challenger Joe Biden remain locked in a tight battle in several key states, but the Congress appears to be heading for a split with control of the Senate possibly not decided until Georgia run-off elections in January. Democrats have a small majority in the House of Representatives.

"That sort of blue wave scenario is very quickly being priced out," said Michael Greenberg, portfolio manager, Franklin Templeton Multi-Asset Solutions.

That likely means a smaller fiscal stimulus and less appetite for more regulations and higher taxes favoured by Biden.

"So I think the market is just sort of taking that into account and obviously doing quite well," he said.

Trump has launched legal challenges in some states, but some of the worst-case fears about civil unrest aren't quite materializing yet and it appears a winner will soon be announced, said Greenberg.

"For the market, whether it ends up being Trump or Biden at the helm, you're still going to likely have a bit of a divided government, in which case it's kind of hard to get the real big policy shifts done that was sort of proposed and maybe expected under more of a blue wave."

That would be the case even if Democrats somehow scrape out a Senate majority to control both houses of Congress and the White House, Greenberg noted.

He said a slim Democratic majority wouldn't be enough to adopt some policies because of ideological differences within the party.

"So they probably needed a bit of a margin of safety to really push through the more aggressive parts of their policy," Greenberg added.

Either way, some sort of fiscal stimulus will be passed with Republican Majority Leader Mitch McConnell saying he hopes to have something done this year and include money for state and local governments.

"The U.S. is still going to be a divided country, but maybe that max divisiveness starts to slow," said Greenberg."

"Once you get through kind of the noise right now of the election and the reality of the economic situation starts to hit people in the face, there's going to be some motivation, whether you're on the left or right side of the aisle, to get some sort of a fiscal stimulus done."

Federal Reserve chairman Jerome Powell also said Thursday that more fiscal support is required.

The S&;P/TSX composite index closed up 299.43 points or 1.9 per cent to 16,298.17. That's the biggest single-day gain since June.

In New York, the Dow Jones industrial average was up 542.52 points to 28,390.18. The S&P 500 index was up 67.01 points to 3,510.45, while the Nasdaq composite was up 300.15 points to 11,890.93.

The indexes had their best four days since April with gains ranging from 7.1 to nine per cent. The TSX was up 4.6 per cent in that timeframe.

Thursday's trading came amid a broad-based rally that saw all 11 major sectors of the TSX rise.

Health care led, gaining 6.15 per cent as shares of Aurora Cannabis Inc. surged more than 40 per cent.

Materials climbed 6.1 per cent with gold prices rising on signs of a U.S. fiscal package this year and weakness of the U.S. dollar.

That helped at least 11 mining stocks to post double-digit gains with Silvercrest Metals Inc. and Silvercorp Metals Inc. up 15.2 and 14.1 per cent respectively.

The December gold contract was up US$50.60 at US$1,946.80 an ounce and the December copper contract was up 0.3 of a cent at US$3.11 a pound.

The Canadian dollar was trading at 76.62 cents US, its highest afternoon level since Aug. 31, and compared to an average of 76.12 cents US on Wednesday.

An acquisition by Lightspeed POS Inc. pushed its shares up 16.3 per cent to help the technology sector.

Air Canada shares soared 7.5 per cent to help industrials.

Energy was up slightly despite lower crude oil prices, while Tourmaline Oil Corp. shares were up 9.7 per cent. The company said Thursday that it was buying two privately-held oil and gas businesses for about $526 million in cash and shares.

The December crude oil contract was down 36 cents at US$38.79 per barrel and the December natural gas contract was down 10.4 cents at US$2.94 per mmBTU.

This report by The Canadian Press was first published Nov. 5, 2020.

Companies in this story: (TSX:AC, TSX:LSPD, TSX:ACB, TSX:SIL, TSX:SVM, TSX:TOU, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press