OIL GAIN BOOSTS TSX DESPITE GDP WOES
TORONTO • The Toronto stock market chalked up a modest advance Friday despite an unexpected decline in Canada’s economy in November as the energy sector ran ahead amid a sharp gain in oil prices.
The S&P/TSX composite index closed up 36.20 points at 14,673.48 as Statistics Canada said gross domestic product in November declined 0.2%, worse than the flat showing that economists had expected after a 0.3% increase in October.
The Canadian dollar plunged to fresh six-year lows on the data, down US0.63¢ to US78.67¢.
Worries that lower- than- expected fourth-quarter economic growth in the U.S. could herald an economic slowdown pushed New York indexes lower. GDP for the period came in at 2.6%, down sharply from 5% in the third quarter. Economists had generally expected a reading of 3.1%.
The Dow Jones industrial average tumbled 251.90 points to 17,164.95, Nasdaq fell 48.17 points to 4,635.24 and the S&P 500 index lost 26.26 points to 1,994.99.
The U.S. GDP report was of particular concern as the U.S. economy has been the top global performer for many months. Growth in China has stalled and the European Central Bank is just now embarking on a program of quantitative easing aimed at stabilizing the eurozone economy and boosting inflation.
“The U.S. is seen as the one bright light globally that has been doing very well and the question mark is: (Is) that going to continue?” said Scott Vali, vice-president of Canadian equities at CIBC Asset Management.
Strength on the TSX came primarily from the resource sectors. The energy group moved ahead almost 5% as oil climbed US$3.71 to US$48.24 a barrel.
Traders looking for a bottom to the plunge in prices reacted positively to news of a big drop in U.S. rig counts as producers respond to oversupply. Investors also drove up stocks in companies taking strong measures to deal with the drop in prices, including slashing spending plans and, in some cases, cutting dividends.
A major gainer was Canadian Oil Sands Ltd., which said Thursday that it was slashing its quarterly dividend to 5¢ a share. It had already announced a cut in the payout in December to 20¢ from 35¢ at a time when oil was about US$67 a barrel. Its shares gained $1.34, or 20.6%, to $7.85.
The base metals sector rose 4.2% as March copper rose US4¢ to US$2.47 a pound.
The gold sector was ahead 4% as April bullion gained US$23.90 to US$1,278.50 an ounce.
The TSX financial sector was the major weight, down 2.25% after Barclays PLC downgraded several of the major Canadian banks, saying that “slower-thananticipated economic growth will weigh on the earnings growth and valuations of the group.”
Barclays downgraded the stock of Bank of Montreal, Royal Bank of Canada and Toronto-Dominion Bank — three of the Big Six — plus Quebec-centred Laurentian Bank to underweight from equal weight.
The TSX finished the week with a gain of 113 points, or 0.8%, led by gains in the energy, tech and consumer staples groups.