Energy gains as TSX ends worst first quarter since 2008 crisis

TORONTO — Canada’s main stock index capped its worst first quarter since at least the financial crisis more than a decade ago on an upswing caused by a rise in the energy sector.

The key sector rose by 15.5 per cent with Canadian Natural Resources, Suncor Energy Inc. and Cenovus Energy Inc. gaining 22.5, 18.4 and 17.8 per cent respectively in heavy trading.

Company shares climbed after TC Energy Corp. announced that the Alberta government was taking a stake in the $8-billion US Keystone XL pipeline to fund the initial construction development costs. That will allow the project to power ahead after years of stops and starts.

“So that was a big relief for some of the heavy oil producers in Western Canada such as Suncor and CNQ,” said Craig Jerusalim, portfolio manager at CIBC Asset Management.

In addition, crude oil prices got a boost after U.S. President Donald Trump approached Russian President Vladimir Putin to begin negotiations to end Russia’s price war with Saudi Arabia that has caused prices to fall to 18-year lows.

Crude oil prices have dropped about 66 per cent in the quarter, falling from $61.18 US per barrel on Dec. 31.

The May crude contract was up 39 cents at $20.48 US per barrel and the May natural gas contract was down five cents at $1.64 US mmBTU.

The S&P/TSX composite index closed up 340.25 points or 2.6 per cent Tuesday to 13378.75.

But that was down almost 22 per cent during the quarter.

“It has been one for the record books,” Jerusalim said. “It was more the speed that the bottom dropped out that riled markets more than anything.”

He said the main difference between this “recession” and previous ones is that the U.S. consumer was a lot healthier going into this crisis.

U.S. markets lost some ground with the Dow Jones industrial average losing 410.32 points to 21917.16 and the S&P 500 index down 42.06 points at 2584.59 for its worst first quarter since 2008. The Nasdaq composite was down 74.05 points at 7700.10.

With much of the economy shut down to contain the spread of COVID-19, the upcoming economic data and company financial reports promise to be bad.

“The unemployment rate is going to spike, retail sales numbers and all the other economic indicators that are released over the next couple of weeks are just going to look absolutely horrific,” said Jerusalim.

But the situation should be better for stock markets ahead of an expected recovery in the third and fourth quarters, he added.

Chinese economic indicators such as PMI or manufacturing data suggest expansion and a recovery is possible weeks after the novel coronavirus.

“So investors are weighing the tug of war between data that they know is going to look scary versus the potentially coming out of it and positioning themselves for a recovery at some point.”

Another positive for markets Tuesday was talk of an additional U.S. stimulus bill in the range of at least $600 billion US that would be used to support mortgages and the travel industry.

The Canadian dollar traded for 70.49 cents US compared with an average of 70.64 cents US on Monday.

Nine of the 11 major sectors on the TSX were higher with the heavyweight financials sector gaining 3.1 per cent as Canadian Western Bank shares were up 6.5 per cent.

Health care and materials were the only sectors to fall. Both dropped slightly as Cronos Group Inc. shares lost 11.4 per cent and Centerra Gold Inc. was down 5.3 per cent as gold prices lost some of their lustre.

The June gold contract was down $46.60 US at $1,596.60 US an ounce and the May copper contract was up 7.25 cents at $2.23 US a pound.