North American stocks rose along with the loonie Friday as jobs numbers from both Canada and the U.S. showed positive but stable growth.
Statistics Canada data showed the economy added 31,800 positions in June, while the unemployment rate rose 0.2 of a percentage point to 6% as more people started looking for work.
The jobs numbers, along with positive wage growth of 3.6%, looked to be enough to justify rate hike this month, said Cavan Yie, a portfolio manager at Manulife Asset Management.
“Good overall, could be better, but good enough for the Bank of Canada to hike rates once again this month.”
The data also showed that many of the added jobs were part-time, self-employed, or public sector jobs that are looked on as less encouraging, but overall the numbers were enough to boost the chances of a rate hike and helped the loonie climb.
The Canadian dollar averaged US76.31¢, up 0.14 of a U.S. cent following the Statistics Canada data, but the currency is still under threat from trade disputes, said Yie.
“The currency is not out of the woods yet, risks to the loonie are well-documented with the ongoing or escalating trade war.”
On Friday, the U.S. went ahead with its 25% tariff on $34 billion worth of Chinese imports. China retaliated with taxes on an equal amount of U.S. products, including soybeans, pork and electric cars, calling the move the start of the “biggest trade war in economic history.”
Yie said while the trade disputes are worrisome, but he doesn’t think they’ll escalate into a full-blown trade war.
“Our base-case view is that cooler heads should prevail … I think the smartest people in the room are all aware that trade wars are good for nobody and actually are disruptive.”
Equities markets were hardly affected by the tariffs as job numbers showed continued economic growth, including 213,000 added jobs in the U.S. helped create a risk-on atmosphere, said Yie.
The S&P/TSX composite index closed up 105.17 points at 16,371.78 on broad-based gains led by telecoms, energy, and base metals.
In New York, the Dow Jones industrial average closed up 99.74 points at 24,456.48. The S&P 500 index closed up 23.21 points at 2,759.82 and the Nasdaq composite index ended up 101.96 points at 7,688.39.
The U.S. job numbers showed averaged hourly wages increased just 2.7% from a year earlier, which means that after adjusting for inflation wages remain nearly flat.
The tepid wage growth is good for equities because it eases pressure on the Federal Reserve to raise rates, said Yie.
“What you’re seeing in our view is something of a Goldilocks situation, where the data coming out looks just right so as not to shift Fed policy one way or another.”
The August crude contract closed up US86¢ at US$73.80 per barrel and the August natural gas contract closed up US2¢ at US$2.86 per mmBTU.
The August gold contract closed down US$3 at US$1255.80 an ounce and the September copper contract was down a penny at US$2.82 a pound.