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Oil’s rebound fuels a rally for TSX, Canadian dollar

Tags: Investing, Loonie, Oil

The Toronto Stock Exchange and the loonie suddenly had momentum on their side Friday. And it all comes back to the price of oil. Crude is into its second straight day of big gains.

One analyst even told BNN “the bottom is in for oil”.

But make no mistake about it - the Canadian discount is still significant, with the currency sitting well below year-ago levels.

The TSX rose sharply on Friday as the rally in crude oil prices supported the resource-linked market, while rising expectations of monetary easing by central banks in Europe and Japan supported risk appetite. European Central Bank President Mario Draghi's remarks on Thursday suggesting the bank could ease its monetary policy in March also encouraged investors.

The Toronto Stock Exchange's S&P/TSX composite index was up 353.72 points, or 2.94 percent, at 12,389.58 by close at 4 p.m.ET.

The S&P 500 and the Nasdaq rallied nearly 2 percent on Friday morning as a cold wave in the United States and Europe helped crude oil surge for a second day.

All 10 major S&P sectors were in the black, led by a 4.67 percent jump in energy stocks. The Nasdaq soared more than 2 percent and was on track for its best day since Oct. 23.

Crude prices, still under pressure from a global glut, were up more than 6 percent as the cold wave boosted short-term demand and traders cashed in their short positions.

The U.S. stock market, tracking oil prices, has failed to sustain any rallies this year as risk-averse investors search for signs of stability.

The S&P 500 is down 8.6 percent in 2016, having closed higher on only six of the 13 sessions.

"I do think that even just to get a couple of days here with neutral, rather than downward, movement is going to be a positive because it's going to settle some fears," said Paul Springmeyer, senior portfolio manager at the private client reserve at U.S. Bank in Minneapolis.

"Long term, the stability of the U.S. economy is really what's at play here and all signs, with low inflation and low oil prices, are pointing to an ability to move forward and move higher," Springmeyer added.

However, concerns about a crude glut and a tepid demand outlook beyond the winter remain. Rating agency Moody's put 120 energy firms across the world on review for downgrades.

At 4 p.m. ET, the Dow Jones industrial average was up 210.90 points, or 1.33 percent, at 16,093.58, the S&P 500 was up 37.91 points, or 2.03 percent, at 1,906.90 and the Nasdaq Composite index was up 119.12 points, or 2.66 percent, at 4,591.18.

Meanwhile, Canada's annual inflation rate edged up slightly in December to 1.6 percent from 1.4 percent in November, with higher prices for food and shelter accounting for most of the change, Statistics Canada said.

Also, Canadian retail sales in November rose by a higher-than-expected 1.7 percent from October to $44.27 billion, pushed up by higher sales of new cars, data from Statistics Canada showed.

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