North American stock markets end wild week with a partial rebound

The Toronto Stock Exchange Broadcast Centre is shown in Toronto on Friday June 28, 2013. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO - North American stock markets rebounded Friday to end a roller-coaster week that took investors for a wild ride on concerns about a possible recession and trade uncertainty.

Canada's main stock index closed up 137.26 points at 16,149.79, but was still down for the week.

In New York, the Dow Jones industrial average was down for a fifth straight week but closed the day higher, adding 306.62 points at 25,886.01 after losing 800 points on Wednesday. The S&P 500 index was up 41.08 points at 2,888.68, while the Nasdaq composite was up 129.38 points at 7,895.99.

The day's relief rally followed some positive comments out of Germany indicating that it is willing to support the economy fiscally should it continue to deteriorate, said Philip Petursson, chief investment strategist at Manulife Investments.

"I think that the market is taking that as a sign that we can see a continued monetary and perhaps fiscal response to the global economic slowdown," he said in an interview.

However, Petursson said he's not convinced that the rally is justified.

"The data continues to be quite weak and if I look at it on a three-month basis, six-month basis, 12-month basis nothing really much has gotten better. A lot of that macro data that we look at just has gotten worse."

In particular, he said the trade war between the United States and China has deteriorated even though U.S. President Donald Trump has delayed implementation of 10 per cent tariffs on some consumer goods for the holiday shopping season.

Petursson said the tariff delay until Dec. 15 only pushes out the timeline for a promised Chinese response until nearer that date.

Friday's market rally could partially stem from investors hoping that the Federal Reserve will cut interest rates more than expected next month. But Petursson said that even if the central bank cut rates by 50 basis points, it won't change the geopolitical risk of trade tensions between the world's two largest economies.

He attributed market volatility, which he expects will continue into September, to a tug of war between optimists and the pessimists.

"The optimist would hope that we're going to see some meaningful resolution to the trade tensions and some continued meaningful response by central banks around the world that will solve the slowdown," he said.

"And I would say those that are on the selling side of the ticket want to wait until things do actually get better before they make a commitment into the market."

The Canadian dollar increased for the first time in a week, trading for an average of 75.27 cents US, compared with an average of 75.05 cents US on Thursday.

Ten of the 11 major sectors of the TSX rose on Friday, led by health care as Aurora Cannabis Inc. was up 3.7 per cent and Canopy Growth Corp. 2.8 per cent.

"It's just a buying day after a couple of days where things have gotten cheap," added Petursson.

Industrials was the second-largest climber on a 4.4 per cent gain by Bombardier Inc. and four per cent by Air Canada. Technology, energy and consumer staples were also higher.

The October crude contract was up 39 cents at US$54.81 per barrel and the September natural gas contract was down 3.2 cents at US$2.20 per mmBTU.

Materials fell 0.7 per cent as First Majestic Silver Corp. and Yamana Gold Inc. were down 3.95 and 3.3 per cent respectively on lower precious metals prices.

The December gold contract was down US$7.60 at US$1,523.60 an ounce and the September copper contract was unchanged at US$2.59 a pound.

Companies in this story: (TSX:FR, TSX:YRI, TSX:ACB, TSX:WEED, TSX:BBD.B, TSX:AC, TSX:GSPTSE, TSX:CADUSD=X)

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