TORONTO — A good showing from the energy sector continues to buoy Canada's main stock index and the Canadian dollar, with one analyst saying investors can expect strong performances from the sector for months to come.
The S&P/TSX composite index closed down 4.86 points to 19,971.15, but briefly topped 20,000 at one point Wednesday.
Greg Taylor, chief investment officer of Purpose Investments, said Canada's energy industry has put in the work to stay profitable in a lower price market, and is well-poised with commodities in demand as economies reopen from pandemic closures.
"I think the energy stocks have a good few months of growth ahead of them here," said Taylor.
"This has been a huge positive for the Canadian market. This was a sector that was really forgotten and thrown out of a lot of portfolios and it’s coming back and looking really attractive as economies reopen."
The July crude oil contract was up US$1.11 at US$68.83 per barrel on Wednesday, its highest level since October 2018.
The TSX Energy Capped Index gained 1.3 per cent as shares of Crescent Point Energy Corp. rose 6.1 per cent and Vermilion Energy Inc. increased 5.4 per cent.
The July natural gas contract was down 2.9 cents at nearly US$3.08 per mmBTU.
In other commodities, the August gold contract was up US$4.90 at US$1,909.90 an ounce and the July copper contract was down 6.2 cents at US$4.59 a pound.
Meanwhile, Taylor said the focus in U.S. markets was on the sudden rise of the volatile so-called "meme stocks" such as AMC Entertainment Holdings Inc, GameStop and BlackBerry Ltd.
AMC's stock was up 95.6 per cent to US$62.55, GameStop Corp. was up 13.3 per cent to US$282.24 and BlackBerry climbed 31.1 per cent to $18.25 on the Toronto Stock Exchange.
"They’re catching a lot of attention because the last few times they've gone on runs like this, like in the end of January and middle of March, that volatility did bleed over to the broader equity markets within the next few days," said Taylor.
"I think that’s causing a bit of concern among some traders," who he says are concerned about a negative impact.
In New York, the Dow Jones industrial average was up 25.07 points at 34,600.38. The S&P 500 index was up 6.08 points at 4,208.12, while the Nasdaq composite was up 19.85 points at 13,756.33.
The Canadian dollar traded for 82.97 cents US compared with 83.06 cents US on Tuesday.
Taylor said strong movement in the Canadian dollar was a result of rising prices of commodities like oil, but was also the result of a 'hawkish' stance by Bank of Canada when compared with other central banks.
"That could all change quite quickly as everyone’s watching the move with the upcoming job numbers and the (Federal Reserve) in June," said Taylor. "If the Fed were to surprise everyone and come out with their taper plans, that would have a direct impact on strengthening the U.S. dollar versus the Canadian dollar."
Taylor pointed out that trading volumes have also been low in the TSX as investors wait to see the outcome of Canada's latest job numbers, that will be released Friday.
This report by The Canadian Press was first published June 2, 2021.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X, TSX:BB)
Salmaan Farooqui, The Canadian Press