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North American stock markets rally for fifth day, loonie adds half a cent

TORONTO – Optimism continued to flow through North American stock markets Thursday as traders kept indices in positive territory for a fifth straight day, as the Bank of England went against expectations and decided to hold off on interest rates.

The Toronto Stock Exchange’s S&P/TSX composite index climbed 20.72 points to 14,514.52, with advances in the metals and energy sectors offsetting losses in real estate and gold stocks.

The Canadian dollar rose 0.52 of a U.S. cent to 77.53 cents US on higher oil prices, as the August crude contract gained 93 cents to settle at US$45.68 per barrel.

In New York, the Dow Jones industrial average and the S&P 500 once again closed at record levels.

The Dow was ahead 134.29 points at 18,506.41, while the broader S&P advanced 11.32 points to 2,163.75. The Nasdaq composite reversed its previous day’s loss by jumping 28.33 points at 5,034.06.

Equities in Toronto and New York have been higher since Friday, when a stronger-than-expected U.S. jobs report was released for June following weak employment data in April and May.

Despite the latest round of positive figures, most still don’t anticipate the U.S. Federal Reserve to raise its benchmark interest rate until the end of the year.

Last December, the Fed boosted the rate by a quarter-point in December to a range of 0.25 per cent to 0.5 per cent. At the time, it also forecasted another four rate hikes this year. Expectations are now that there will only be one hike, if at all.

The volatility that followed the surprise British vote to leave the European Union last month is another reason why analysts believe rates will stay low for some time.

“As a result of Brexit, central banks are going to counteract that course and not raise rates anytime soon,” said Ian Nakamoto, a director of research at 3Macs.

While the recent uptick in stock markets can be attributed to investors being more attracted to possibly higher returns from equities over bonds amid a low-interest rate environment.

“There is no alternative,” Nakamoto noted.

Laura Lau, a senior portfolio manager at Brompton Group, said that investors are starting to realize that the economic fallout from Brexit will likely have little impact on the Canadian and U.S. economies, which don’t rely heavily on the U.K. as a trading partner.

Overseas, economists had expected the British central bank to slash rates after Brexit, which initially sent the pound plummeting to a 31-year-low.

But the bank said it’s taking a wait-and-see approach to rates until it knows the overall economic impact of Brexit.

In commodities, the August contract for natural gas was down a penny at US$2.73 per mmBtu. The August gold contract fell US$11.40 to US$1,332.20 an ounce, while September copper contracts were unchanged at US$2.24 a pound.

Follow @LindaNguyenTO on Twitter.