BNN Bloomberg's mid-morning market update: August 27, 2020
TORONTO - Losses in the materials and energy sectors pulled Canada's main stock index lower on Thursday as the price of both gold and oil fell and the dollar rose.
The S&P/TSX composite index wound up down 58.48 points at 16,731.49 at the close after starting the day on a strong positive note.
The Canadian dollar strengthened to 76.17 cents US, compared with 76.02 cents US on Wednesday, after the U.S. Federal Reserve made a major overhaul to its strategy that could keep interest rates lower for longer and allow higher levels of inflation south of the border.
Chair Jerome Powell said Thursday the Fed may continue efforts to prop up the economy even if inflation rises above its target level of two per cent, sending signals that could drive the U.S. greenback lower and the loonie higher in comparison, said Michael Greenberg, portfolio manager at Franklin Templeton Multi-Asset Solutions.
The Fed's commitment creates a “decent environment for risky assets,” Greenberg said, provided that markets can withstand short-term risks such as the possibility of a COVID-19 second wave as students go back to school, the upcoming U.S. presidential election in November and unexpected negative economic signals.
“You're kind of in a tough short-term period here because of those uncertainties but I think when you look at it a little bit more long-term, it's not that bad of an environment,” he said, referencing the next nine to 12 months.
“If you assume you get through the U.S. election somewhat unscathed, if at some point there are health breakthroughs on the virus front, you're going to be left with an environment where the Fed has told us they're not going to raise rates for quite some time, so that sort of 'liquidity punch bowl' is still there.
In New York, the Dow Jones industrial average was up 160.35 points at 28,492.27 and the S&P 500 index climbed 5.82 points to 3,484.55 on Thursday.
The Nasdaq composite was down 39.72 points at 11,625.34.
Prices for stocks, bonds and gold all made several U-turns after Powell gave his highly anticipated speech.
Gold for delivery in December wound up down US$19.90 at US$1,932.60 per ounce after rising earlier in the day.
Mining stocks traded lower, dropping the materials sector by 2.12 per cent. Yamana Gold Inc. slipped 4.7 per cent to $7.71, Centerra Gold Inc. fell 4.2 per cent to $16.22 and giant Barrick Gold Corp. fell three per cent to $37.48.
The October crude contract was down 35 cents at US$43.04 per barrel as many refineries on the U.S. Gulf Coast shut down operations to wait out Hurricane Laura, thus reducing demand, Greenberg said.
Stock reaction was mixed, though, with Crescent Point Energy Corp. down 2.08 per cent to $2.35 and Enerplus Corp. off 1.91 per cent to $3.59, but Suncor Energy Inc. up 0.79 per cent to $21.59.
The financial sector posted the strongest showing on the Toronto market on Thursday, up 0.66 per cent as the Toronto-Dominion Bank became the latest of the big Canadian banks to report quarterly results that beat analysts' modest expectations.
Life and health insurance provider iA Financial Corp. gained 1.96 per cent to $49.49 and CIBC rose 1.91 per cent to $104.01, while TD was up 0.05 per cent to $66.40.
The October natural gas contract rose nearly 14 cents at US$2.71 per mmBTU and the December copper contract was up almost a penny at US$2.99 a pound.