CANADIAN EQUITIES-Toronto market rebounds as oil hits 7-year high
(Adds investor quotes and details throughout, updates prices)
* The TSX ends up 131.18 points, or 0.7%, at 20,183.43
* The Energy group climbs by 2.8%; oil shrinks by 1.7%
* Consumer discretionary adds 1%; financials gain 0.9%
* The spread between 2 and 10 year rates widens to 100 basis points
TORONTO, Oct.5 (Reuters) – Canada’s main stock index rose on Tuesday as a seven-year high for oil prices supported energy stocks and bank stocks benefited from a yield curve steeper, the index recovering from a month and a half low the day before.
The Toronto Stock Exchange’s S & P / TSX Composite Index ended up 131.18 points, or 0.7%, to 20,183.43. On Monday, it posted its lowest closing level since July 20.
“Energy stocks are helping drive the index up today,” said Lorne Steinberg, president of Lorne Steinberg Wealth Management Inc.
The energy group climbed 2.8% as oil hit its highest level since 2014, supported by OPEC + ‘s decision on Monday to stick to planned production increases. US crude prices rose 1.7% to $ 78.93 per barrel.
Consumer discretionary stocks added 1%, while financials, which account for about 30% of the Toronto market cap, rose 0.9%.
“We remain very bullish on the banks,” Steinberg said. “They still appear to be a fairly cheap and attractive sector in the market and a huge beneficiary of a steeper yield curve.”
A steeper yield curve, or a wider spread between long-term and short-term rates, helps improve bank profit margins.
The spread between Canadian 2- and 10-year rates widened from 4.1 basis points to 100 basis points in favor of longer-dated bonds, the widest spread since June.
Concerns about higher inflation and slower economic growth have shaken investor morale in recent weeks. However, the Toronto market has gained nearly 16% since the start of the year.
The gains for the TSX on Tuesday came as data showed Canada’s trade surplus with the world widened in August to C $ 1.9 billion.
The Canadian employment report for September is due on Friday, which may offer clues to the outlook for Bank of Canada policy. (Reporting by Fergal Smith; Additional reporting by Amal S in Bengaluru; Editing by Lisa Shumaker)