Canada’s main stock index recovered some of the steep losses from a day earlier as investors saw tensions easing on the trade front Thursday.
Markets and commodities rallied on news that the U.S. and China would hold talks in late August, the first since both countries imposed $34 billion in tariffs on each other in June.
The news was seen as potential progress on trade disputes, but optimism on the meeting looks to be overblown, said Kash Pashootan, CEO and chief investment officer at First Avenue Investment Counsel Inc.
“Obviously the market views that as a positive, but you have to ask yourself, is the U.S., at this point, looking to change their approach? Are they looking to all of the sudden be accommodative and co-operative with other countries?”
He said markets remain surprisingly enthusiastic and optimistic given that we are in the middle of a trade war that’s only being addressed with token measures.
“We’re getting band-aid solutions following threats and tariffs that are imposed, which so far are enough for the markets to shrug off the longer-term implications of a trade war.”
Optimism on the trade talks helped push the S&P/TSX composite index 77.15 points to close at 16,225.65 in broad gains including base metals, financials and energy sectors after the index fell 182.17 points Wednesday. The index hit an intraday high of 16,287.7 and had 199.69 million shares traded.
Base metal miners rose as the September copper contract closed up 6¢ at US$2.62 a pound to recover half of its losses from Wednesday.
Gold miners, however, slipped further as the metal remained under pressure, falling another dollar to US$1,184 an ounce for the December gold contract after steep falls in recent days.
Commodities including base metals and crude had fallen in recent days as investors worried a currency crisis in Turkey, signs of slowing growth in China, and spreading trade disputes could destabilize emerging market growth.
Pashootan said the threat remains if the push towards more open trade is disrupted because of the tariff disputes.
“If there is a dismantling of this approach, we’re going to ultimately dismantle what’s taken decades to put together, which is really a global structure of free trade and the ability to co-operate.”
In New York, the Dow Jones industrial average closed up 396.32 points, or 1.58%, at 25,558.73. The S&P 500 index ended up 22.32 points at 2,840.69, while the Nasdaq composite closed up 32.41 points at 7,806.52. A big earnings beat from Walmart helped boost the market.
The Canadian dollar averaged US76.03¢, down 0.09 of a U.S. cent. Statistics Canada said Thursday that manufacturing sales were up 1.1% to $58.1 billion in June, higher than the 0.9% expected by economists, according to Thomson Reuters Eikon.
The September crude contract closed up US45¢ at US$65.46 per barrel and the September natural gas contract closed down US3¢ at US$2.91 per mmBTU.