Geopolitical issues send stocks higher

Rising commodity prices helped push Canada’s main stock index to close higher, while U.S. markets surged after Chinese President Xi Jinping offered possible concessions in a trade dispute with the U.S.

Oil prices rose 3.3 per cent as U.S. President Donald Trump said he’s considering retaliatory action on chemical weapons use by Syria, raising geopolitical tensions and potential supply disruptions in the region, said Sid Mokhtari, executive director of institutional equity research at CIBC.

“We believe that the supply side could be altered, and that could keep the oil prices higher, north of US$65,” he said.

The rise in oil prices, with the May crude contract closing up $2.09 at $65.51 a barrel, helped send Canadian equities and the dollar up on what was a quiet day for volume on the markets, said Mokhtari.

The S&P/TSX composite index closed up 34.44 points at 15,262.14, led by base metals and energy. Along with rising oil prices, copper also saw gains with a six cent jump to US$3.14 a pound for the May contract.

“We continue to see a bit of a rotation into the energy complex and some of the commodities, so I think that’s definitely been helping Canada,” said Mokhtari.

The Canadian dollar averaged 79.25 cents US, up 0.69 of a US cent, up more than three cents since mid-March.

The dollar isn’t likely to push much higher though, said Mokhtari, as NAFTA trade issues, housing, and other economic uncertainties will keep the loonie moving sideways. “We believe the C dollar is at best a range-bound profile, especially given the housing market jitters and a Canadian fed that’s sitting on the sideline and letting the US do the job,” he said.

Energy prices and U.S. stocks were also boosted as Chinese President Xi Jinping made steps to ease trade tensions, committing to reduce tariffs on imported cars and improve intellectual property protection.

In New York, the Dow Jones closed up 428.90 points at 24,408.00. The S&P 500 index was up 43.71 points at 2,656.87 and the Nasdaq ended up just over two per cent or 143.96 points at 7,094.30.

Mokhtari said that despite the gains, thin volume showed investors are waiting to see what comes from first quarter results and the guidances that will follow.

“As we are going into the earnings period, investors are in a wait-and-see mode. There’s a bit of a buyers strike and there isn’t really selling pressure,” he said.

“It’s definitely a much tamer price action behaviour, no real conviction on the upside, even though we’re seeing some better uptick in the market, at least from the investor perspective, it’s very, very quiet in terms of activity.”

The May natural gas contract was down four cents at US$2.65 per mmBTU and the June gold contract ended up US$5.80 at US$1,345.90 an ounce.