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North American stock markets resume climb despite another drop in oil prices

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    TORONTO — Canada’s main stock index resumed its climb in a broad-based rally despite another drop in crude oil prices since the U.S. brokered a supply cut deal.

    Markets moved up despite some competing narratives, said Erik Bregar, head of currency strategy at the Exchange Bank of Canada.

    Overnight headlines out of China highlighted a US$19.9 billion trade surplus for March that was better than was expected and a reversal from February’s US$71-billion deficit. Exports were down 6.6 per cent but that was less than the forecasted 15 per cent drop.

    And there was talk of the Chinese working on three new vaccines for COVID-19.

    But negative headlines to digest included talk of further extensions to lockdowns in the U.K., France, India and Ontario.

    And crude oil prices fell about eight per cent.

    "That’s definitely not a risk-on thing. I think the markets are effectively saying, you know that OPEC deal from the weekend was a bit of a farce. Maybe something to placate Trump a little bit," he said in an interview.

    Saudi Arabia’s continued discounting of sales to Asian buyers proves that demand is a huge issue for the market and the nearly 10 million barrels per day cut "is just not going to cut it", Bregar added.

    Energy was the sole major sector on the TSX to fall. It lost 1.8 per cent with shares of Enerflex Ltd. and Enerplus Corp. declining 8.5 and 7.3 per cent respectively.

    The May crude contract was down US$2.30 at US$20.11 per barrel and the May natural gas contract was down 7.4 cents at US$1.65 per mmBTU.

    Gold prices continued to set new seven-year highs, helping sector players including Ivanhoe Mines Ltd. gain 8.6 per cent.

    The June gold contract was up US$7.50 at US$1,768.90 an ounce and the May copper contract was up 2.7 cents at US$2.33 a pound.

    "I think what we’re seeing here is true safe haven buying in gold. People are running to physical assets as opposed to paper assets," Bregar said.

    The S&P/TSX composite index closed up 182.49 points at 14,258.43. That’s the highest close in more than a month and below the intraday high of 14,40.91.

    In New York, the Dow Jones industrial average was up 558.99 points at 23,949.76. The S&P 500 index was up 84.43 points at 2,846.06. The Nasdaq composite was up 323.32 points or nearly four per cent at 8,406.65 as Amazon.com Inc. hit a record high.

    The Canadian dollar traded for 71.92 cents US — the highest level in about a month — compared with an average of 71.76 cents US on Monday.

    Wednesday’s report by the Bank of Canada is widely expected to be a "non-event," Bregar said.

    The central bank will provide its outlook for the domestic economy and release a decision on its target overnight interest rate. It has already cut its key rate three times in March alone, two of those decisions being unscheduled announcements, to bring the rate from 1.75 per cent down to 0.25 per cent.

    Technologies led the TSX by climbing 5.3 per cent as Lightspeed POS Inc. and Shopify Inc. gained 14 and 11.25 per cent respectively.

    Stock market investors are bullish on expectations of a V-shaped or quick recovery and weren’t put off by weak first-quarter results reported Tuesday.

    JPMorgan Chase’s first-quarter profit plunged nearly 70 per cent as the bank put US$8.29 billion to cover potential losses tied to the coronavirus pandemic. Wells Fargo’s profits plunged nearly 90 per cent as it put aside US$3.83 billion in preparation for consumers and businesses defaulting on loans.

    Johnson & Johnson, anticipating significant impact from the COVID-19 pandemic, slashed its 2020 sales forecast by billions of dollars and cut its profit expectations by about 15 per cent.

    "It just amazes me how they latch on to positives more so than the negatives," Bregar said, noting that the bond and currency markets are more circumspect.

    This report by The Canadian Press was first published April 14, 2020.

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