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Mar 24, 2020

TSX surges record 12% as stimulus hopes gain momentum

Take the time to re-calibrate your equity exposure: Market strategist

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Canadian stocks soared the most in at least 43 years, joining a global rally on hopes government stimulus will soon flow to economies hammered by the coronavirus.

The S&P/TSX Composite Index rose 12 per cent on Tuesday, the biggest one-day percentage jump since at least 1977 when the index’s predecessor began. South of the border, stocks boomed with the Dow Jones Industrial average posting its best day since 1933 as a U.S. stimulus bill of about US$2 trillion inches forward.

Investors had been searching for buying opportunities amid the brutal sell-off but volatility has made it difficult to call a bottom on the stocks. The Canadian market is still down about 30 per cent from its February peak.

“We had cash going into this period, and I have been investing it as the market has been going down,” said Whitney George, chief investment officer of Sprott Asset Management. “I have been reinvesting the proceeds incrementally as the market keeps dropping.”

Gold’s spot price was up about 5 per cent and silver more than 6 per cent on Tuesday, giving a boost to mining stocks. The spending package by the U.S. government caused Goldman Sachs to predict an “inflection point” for gold and the bank is recommending its clients buy now.

Canada’s economic heartland is shutting down to fight the virus outbreak. Ontario and Quebec, which together account for about 57 per cent of the country’s economy, have ordered non-essential businesses to close by the end of today. Nearly one million Canadians applied for jobless claims last week, representing almost 5 per cent of the labor force, according to a senior government official with knowledge of the data.

Debate on Prime Minister Justin Trudeau’s CUS$82 billion (US$57 billion) stimulus package is stalled as parties negotiate the terms in a minority parliament.

Within the energy patch, record low prices for heavy Canadian crude have prompted one of the biggest operators in the oil sands to take the rare step of shutting production. Motivated by the “extremely low” prices, Suncor Energy Inc. announced on Tuesday that it will shut in one of its two so-called trains at its two-year-old, 194,000 barrel a day Fort Hills oil sands mine.

Bombardier Inc. said it will suspend all non-essential work at most Canadian-based operations tonight until April 26 to comply with government mandates to help slow the spread of Covid-19.

Sprott’s George is keeping a positive outlook for the market despite all the volatility. “Looking ahead, I am confident that markets and the economy will bounce back as they have had in the past,” he said.

Commodities

  • Western Canada Select crude oil traded at a US$15.00 discount to West Texas Intermediate
  • Spot gold rose about 4.7 per cent to US$1,626.15 an ounce

FX/Bonds

  • The Canadian dollar was little changed at CUS$1.4487 per U.S. dollar
  • The 10-year government bond yield rose about 8 basis points to 0.873 per cent

 

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