Energy powers S&P/TSX composite index to highest level since February; loonie up

Bank towers are shown from Bay Street in Toronto's financial district, on Wednesday, June 16, 2010. THE CANADIAN PRESS/Adrien Veczan

TORONTO - Energy powered Canada's main stock index to its highest since Feb. 24 as crude oil prices increased for a fifth straight week and the loonie topped 78 cents US.

The rally in energy stocks reflected that the oil price has been improving in the last 30 days, said Pierre Cleroux, vice-president of research and chief economist for the Business Development Bank of Canada.

In fact, West Texas Intermediate reached its highest level since early March.

"There's hope that the economy is going to perform better in 2021 and the demand for oil is going to increase. So we we saw today a pretty strong performance from a lot of energy stocks in Canada," he said in an interview.

Energy was the best-performing sector on the TSX, gaining 5.7 per cent with MEG Energy Corp. and Crescent Point Energy Corp. up 10.9 and 9.9 per cent, respectively. Suncor Energy Inc. gained 7.6 per cent in heavy trading of 27.3 million shares.

The January crude oil contract was up 62 cents at US$46.26 per barrel and the January natural gas contract was up 6.8 cents at US$2.57 per mmBTU.

Oil prices were helped by OPEC plus Russia agreeing to keep supply in check and hope that COVID vaccines will increase oil demand next year.

"World demand is still 10 per cent below February. So thinking that the vaccine is going to accelerate the growth and the demand for oil, I think that really makes the rally in this sector," said Cleroux.

"People see the light at the end of the tunnel."

In addition, Canadian jobs numbers were strong for November with 62,000 positions added and the unemployment rate falling to 8.5 per cent. Despite the gains, the pace of job growth slowed from October.

The S&P/TSX composite index closed up 122.95 points to 17,520.97. It hit an intraday high of 17,525.74 that's just 2.5 per cent off the February record high.

In New York, the three main stock markets all closed at all-time highs. The Dow Jones industrial average was up 248.74 points at 30,218.26. The S&P 500 index was up 32.40 points at 3,699.12, while the Nasdaq composite was up 87.05 points at 12,464.23.

The gains came even though employment numbers were not as strong in the United States.

Nonfarm payrolls increased by 245,000 jobs in November, the smallest gain since the COVID-19 pandemic and below the 610,000 gain in October.

Cleroux said the markets didn't seem to mind as they anticipate that the Republicans and Democrats will probably agree on a new fiscal stimulus package.

"I think a lot of people believe we're going to get that in the next few days or few weeks, and that's going to help the economy."

Industrials and financials were among seven sectors that gained ground on the day.

Materials was slightly lower as the price of gold fell.

The February gold contract was down US$1.10 at US$1,840.00 an ounce and the March copper contract was up 3.4 cents at US$3.52 a pound.

The technology was weaker even though shares of BlackBerry Ltd. increased 13.2 per cent.

The Canadian dollar traded for 78.12 cents US compared with 77.64 cents US on Thursday.

The loonie increased to its highest level since May 2018 on continued weakness from the U.S. greenback.

"As the global economy is improving, investors are rebalancing their portfolios. So they are buying a little bit more outside the U.S. which makes the U.S. dollar a bit weaker," said Cleroux.

However, he expects the loonie will slip back closer to 75 cents US in the next few months.

"I think this increase that we're seeing now is is temporary."

Markets were positive for the week, gained between 0.7 and 2.1 per cent.

"The month of November has been strong. The starting of December has been good as well so we are on a good straight here."

This report by The Canadian Press was first published Dec. 4, 2020.

Companies in this story: (TSX:CPG, TSX:MEG, TSX:SU, TSX:BB, TSX:GSPTSE, TSX:CADUSD=X)

The Canadian Press. All rights reserved.