North American stock markets rise on hope of new U.S. stimulus and good news in China

TORONTO — North American stock markets started the week higher on positive economic signs out of China and renewed optimism for another U.S. stimulus package.

Markets got an early bump following weekend reports in China that industrial profits rose 19 per cent in August, the fourth consecutive monthly increase, providing further evidence of a recovery from the COVID-19 pandemic.

Investors were also hopeful that a deal can be reached on a stimulus package after House Speaker Nancy Pelosi said on Sunday that such a move is possible.

The Democrats are trying to win support for a US$2.4 trillion package, about US$1 trillion less their initial proposal but more than what Republicans appear willing to support.

“It’s certainly a strong day in the markets,” said Anish Chopra, managing director with Portfolio Management Corp.

“If you look at what kind of news has been out there driving the markets….just positive news all around.”

The S&P/TSX composite index closed up 177.46 points at 16,242.81.

In New York, the Dow Jones industrial average was up 410.10 points at 27,584.06. The S&P 500 index was up 53.14 points at 3,351.60, while the Nasdaq composite was up 203.96 points at 11,117.53.

Ten of the 11 major sectors on the TSX were higher, led by energy, consumer discretionary and financials.

Energy gained 3.6 per cent with Vermilion Energy Inc., Cenovus Energy Inc. and MEG Energy Corp. up 6.6, 6.5 and 6.5 per cent respectively on higher crude oil prices.

The November crude contract was up 35 cents at US$40.60 per barrel and the November natural gas contract was down 1.2 cents at nearly US$2.80 per mmBTU.

Chopra said the positive outlook in China and the prospect for a U.S. financial package was positive for the U.S. economy and for oil demand.

“If you’re got the two largest global economies starting to move to a full recovery certainly very positive for oil,” he said in an interview.

The Canadian dollar traded for 74.75 cents US compared with 74.56 cents US on Friday.

Sectors that have in the past lagged, including financials, energy and industrials played catch-up on Monday.

“If you have a continuation of that work-from-home trend then it’s really the tech companies that are the main beneficiaries, but you get more of a broad-based recovery in the economy…I would say that has an effect on other parts of main street.”

Concerns about increasing COVID-19 infections seemed to take a back seat as investors have come to the conclusion that they’re going to have to live with the impact of the virus, Chopra said.

“There’s certainly some optimism that there will be a vaccine at some point in the first half of next year, but I think investors have come to the conclusion that you just have to live with the coronavirus and its impact on the companies and on the markets.”

Consumer discretionary rose two per cent as autoparts suppliers Martinrea International Inc., Linamar Corp. and Magna International Inc. all climbed on ratification of a new contract by Ford unionized workers.

Financials were also up about 1.9 per cent and materials gained 0.4 per cent.

The December gold contract was up US$16 at US$1,882.30 an ounce and the December copper contract was up 1.9 cents at US$2.99 a pound.

Technology dropped slightly as shares of BlackBerry Ltd. lost three per cent.

Chopra said investors are waiting for the first presidential debate on Tuesday, with reaction to be seen that night on futures markets and Wednesday morning in stock markets.

“The debates should certainly have an impact on investor perception of who’s going to win come November but it’s not a main driver for today.”

This report by The Canadian Press was first published Sept. 28, 2020.