Canada Stock Update; BMO Economics also comments on oil prices and the Canadian dollar

Canada’s main stock market, the Toronto Stock Exchange, lost more than 30 points in the last hour on Friday, but still closed nearly 180 points higher for the session, supported by higher stock prices. raw materials and the resumption of purchases of technology stocks. According to BNN Bloomberg TV, that leaves the TSX up about 0.5% year-to-date, compared to losses of nearly 10% for the Nasdaq over the same period.

Among the sectors, Info Tech progressed by more than 5%, but fell by 17% over one year. Within this sector, Shopify (SHOP.TO) is up 8.8% today, although down 28% year-on-year. And the energy sector was up 0.6% today,

Staying on tech stocks, BMO Economics in its “Talking Points” note on Friday noted that just as it looked like tech stocks were “sweeping their January funk,” with the Nasdaq jumping 8% in four sessions, a day 26% “faceplant by Meta crushed the party”. Even so, BMO noted, the index still managed to chart a course for a moderate weekly gain, after posting a “weak” rise last week. More generally, the S&P 500 and TSX also managed a second week of “decent” gains after a shaky start to the year. BMO noted that the TSX is now slightly higher since the start of 2022 (as of midday Friday), while the S&P 500 was “still in good shape” with a 6% decline. “Obviously,” BMO said, “the relative performance of the TSX is benefiting from the surge in oil prices, although the same cannot be said for consumers, bonds or the loonie.”

BMO Economics, in its “Talking Points” note on Friday, said adding another element of urgency to the task at hand for central banks is the “irresistible” rise in oil prices. WTI jumped to US$93 a barrel on Friday, up more than 6% on the week and more than 60% year on year. BMO noted that OPEC+ is sticking strictly to its plan of incremental production increases this week, “seemingly completely unresponsive to the pronounced strength in crude prices.” Some have cited tensions in Ukraine as a cause of the latest rebound, but BMO said it appears something more fundamental has driven prices to their highest level since 2014, namely the lack of a response. significant increase in supply to the great return of global demand. Last year. At the start of the year, BMO noted, many analysts called for a moderation in crude prices, with the conventional view looking for a price drop to $70-75. “The upside surprise simply increases the risk on an already weighty inflation outlook globally,” he added.

Meanwhile, BMO noted that even amid continued strength in oil prices, the Canadian dollar “remains incredibly stable.” Not only has it barely budged on the net this week, even as oil prices surged, it’s almost unchanged from a year ago (at $/US$1.278, or just over 78 cents ). This challenges the conventional wisdom that the loonie is a petro-currency. BMO asked itself: What gives? In part, BMO said, the currency has been held back by the broad-based strength of the U.S. dollar as the Fed’s outlook shifted so abruptly. Still, BMO noted, the greenback has mostly eased this week and the Canadian dollar still hasn’t benefited. Admittedly, BMO said, the BoC disappointed markets by not rising last week. “But,” he added, “there is still more to the Bank in 2022 than the Fed (a view we continue to have a serious feud with).”

Either way, BMO noted, the lack of monetary response to the oil surge drove domestic prices to the equivalent of C$118 a barrel, the highest on record outside of 2008. BMO said: “This is great news for producers, but not so good for consumers, as gasoline prices continue to reach record highs, and a clear indication of the persistence of upcoming inflation readings. overall.”

Among commodities today, gold rebounded from early weakness on Friday after a surprisingly strong US jobs report boosted the dollar and bond yields hit their highest level in more than two years . Gold for April delivery closed up $3.70 and settled at US$1,807.80 an ounce, having earlier fallen to US$1,792.10.

Additionally, West Texas Intermediate (WTI) crude hit new seven-year highs due to ongoing supply issues amid high demand and geopolitical tensions as Russia, the world’s second-largest oil producer, continues to threaten Ukraine, while a cold spell in Texas threatens to tighten. state oil supply. WTI crude for March delivery closed up $2.04 to settle at US$92.31 a barrel, Marketwatch reported. April Brent crude, the global benchmark, rose $2.14 to US$93.25, while Western Canada Select rose $2.21 to US$78.70 a barrel. The rise to the highest since fall 2014 also comes as a winter storm pushes temperatures in central Texas below freezing, raising concerns about potential power outages and frozen wellheads.

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Felix J. Dixon