TORONTO – North American markets closed higher Friday but the loonie sank as solid U.S. job figures helped settle investors’ nerves following a turbulent couple of weeks.
A much stronger than expected U.S. jobs report boosted markets on both sides of the border, including a triple-digit gain in Toronto.
The U.S. Labor Department said employers added 287,000 jobs in June, following disappointing figures in April and May, suggesting that the American economy is recovering from a slump.
Stock markets responded positively to the news, with the Dow Jones industrial average climbing 250.86 points at 18,146.74, the broader S&P 500 composite index advancing 32.00 points to 2,129.90 and the Nasdaq composite gaining 79.95 points to 4,956.76.
The Toronto Stock Exchange’s S&P/TSX composite index also came along for the ride, rising 125.38 points to 14,259.84.
The broad-based rally was led by base metals stocks, which were up 4.13 per cent, while the global gold sector of the TSX gained 2.67 per cent.
“You’re getting a bit of a relief rally, as people take a sigh of relief from some of the more fearful things we’ve been pondering over the last week or so,” says Colum McKinley, vice-president and portfolio manager of Canadian equities at CIBC Asset Management Inc.
A number of global economic headwinds have rattled investors in recent weeks, including the U.K.’s decision to leave the European Union, dubbed Brexit, as well as concerns about the Italian banking system, McKinley said.
McKinley said that while the U.S. jobs figures are positive, there is likely still some turbulence ahead.
“I would caution that it is a single data point, and I think that over the coming months and quarters we’re still going to have to digest more significant fears or challenges in the market, and so we want to be careful in over-reacting to a short-term data point,” he said.
Employment data north of the border was less rosy, as Statistics Canada reported that the economy lost 700 net jobs in June.
Gains in the services sector were offset by losses in construction and factory work, the federal agency said.
That caused the loonie to sink to 76.69 cents US, down 0.22 of a cent from Thursday’s close.
“The currency is reflecting the fact that you have numbers that came out today that suggest that the U.S. economy is stronger and the Canadian economy potentially a little weaker,” McKinley said.
“It’s just the difference in the employment numbers being reflected in the currency.”
In commodities news, the August crude contract rose 27 cents at US$45.41 per barrel and August natural gas was up two cents at US$2.80 per mmBTU.
The August gold contract fell $3.70 to US$1,358.40 an ounce and September copper contracts were virtually flat at US$2.12 a pound.
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