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Forecasts for Canada’s TSX hiked as analysts eye global recovery: Reuters poll

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TSX rises

TORONTO (Reuters) – Canada‘s main stock index is expected to extend its record-setting rally this year as a global economic recovery boosts the outlook for the index’s heavily weighted financial and resource stocks, a Reuters poll found.

The median forecast in a survey of 24 portfolio managers and strategists was for the S&P/TSX Composite index to rise to 19,650 by the end of 2021, up 7.2% from Tuesday’s close of 18,330.09. November’s forecast was 18,400.

It was then expected to rise further to 20,125 by the middle of 2022.

“The TSX Composite with its heavy makeup of financials, energy and material stocks should be a perfect proxy and beneficiary of a global economic reopening,” said Matt Skipp, president of SW8 Asset Management.

Investors expected the rollout of COVID-19 vaccines, historically low interest rates and fiscal stimulus to support an economic recovery. In January, the International Monetary Fund projected the global economy would grow 5.5% in 2021 after an estimated 3.5% contraction in 2020.

Financial and resource stocks account for more than 50% of the Toronto market’s valuation. The energy sector has surged about 75% since the end of October, helped by a rally in crude oil prices.

“Toronto is usually a latecomer in a bull market,” said Ron Meisels, president of Phases & Cycles, an investment research firm. “The energy stocks are just now starting to participate.”

With energy prices moving up, so have expectations for inflation, contributing to a jump in global long-term bond yields since the start of the year.

Higher long-term rates could help the profit margins of banks, all the more so because short-term rates, which are more sensitive to central bank policy, are currently stuck near zero. Banks often fund their lending with short-term borrowing or deposits.

Another potential upside for banks would be the lifting by Canada‘s main financial regulator of a suspension on share buybacks and dividend increases, said irwin, a portfolio manager at ABC Funds.

The Office of the Superintendent of Financial Institutions imposed the suspension last March to help gird against the economic impact of the pandemic.

“I see pent-up dividend increases over the next six to 12 months,” Michael said.

Consumer spending is also waiting to be unleashed, strategists said, after an historic level of economic support from Canada‘s government helped swell Canadian savings to record levels.

That could support corporate earnings, which most of the poll’s respondents forecast would return to pre-COVID-19 levels within a year or earlier.

“Once we get past COVID … I expect a massive acceleration of economic growth as the pent-up demand and excess savings are released,” said Philip Petursson, chief investment strategist at Manulife Investment Management.

(Other stories from the Reuters Q1 global stock markets poll package:)

 

(Reporting by Fergal Smith; additional polling by Manjul Paul and Richa Rebello; editing by Larry King)

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Economy

CANADA STOCKS – TSX ends flat at 19,228.03

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* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03

* Leading the index were Corus Entertainment Inc <CJRb.TO​>, up 7.0%, Methanex Corp​, up 6.4%, and Canaccord Genuity Group Inc​, higher by 5.5%.

* Lagging shares were Denison Mines Corp​​, down 7.0%, Trillium Therapeutics Inc​, down 7.0%, and Nexgen Energy Ltd​, lower by 5.7%.

* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.

* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.

* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude  fell 0.24%, or $0.15, to $63.05 [O/R]

* The TSX is up 10.3% for the year.

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Canadian dollar outshines G10 peers, boosted by jobs surge

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.

Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.

“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”

Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.

The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.

The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.

Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.

The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.

Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.

 

(Reporting by Fergal Smith; Editing by Andrea Ricci)

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Canadian dollar rebounds from one-week low ahead of jobs data

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.

The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.

“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”

Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.

The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.

Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.

On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.

(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)

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