Canada stocks rally on EU plan, GDP growth
SAN FRANCISCO (MarketWatch) -- Canadian stocks finished the week with gains, as mining, metals and materials rallied Friday.
After forgone expectations that the summit would yield anything of significance, surprising plans by the European Union this morning rejuvenated markets, said Jimmy Jean, senior economist at Desjardins.
In addition to news out of the euro zone, further optimism came with reports that Canada's real gross domestic product accelerated by 0.3% in April, beating consensus estimates of 0.2%, according to Statistics Canada. The GDP rose by 0.1% in March.
TD Securities analysts said they project annualized second quarter growth to fall modestly above 2.0%, while Capital Economics estimated it will stand at 2.2%.
"With growth in the Canadian economy forecast to bounce around its trend rate this year, the absorption of excess capacity will slow, allowing the Bank of Canada to once again focus on the downside risks, mostly international in origin. that shroud the outlook," David Tulk of TD Securities wrote in a note Friday.
Improvements were attributed to a 2.7% rebound in mining and oil production, though offset by a drop in natural gas output. Mining in the oil and gas extraction sector during February and March fell 2% and 1.1%, respectively.
Despite the encouraging news, "the deteriorating outlook for global economic growth and commodity prices, especially oil, is threatening Canada's economic growth prospects," wrote David Madani, economist at Capital Economics, in a response to the data.
"We have seen the relationship between the TSX and oil tighten. Very recently energy prices have been one of the fundamental drivers of the TSX," said Jean.
The weakest performing sector was retail, whose GDP fell 0.8% in April, reported Statistics Canada.
However TD Securities analysts calculated that retail sales volumes rebounded significantly in May, and estimated that second quarter consumption rose by 1.5% annualized, up from the previous session's 0.95% increase.
Separating itself from the market's upward trend,
As the nation approached Canada Day weekend, trading volume thinned Friday.
This to some degree "can exaggerate upward moves in prices compared to what would be the case in a normal trading day," said Jean.
Still, Canada's benchmark equities index edged upward 1.4% on the week and was up 0.7% for the month, though it fell 6.4% for the quarter. On Wall Street the S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) rallied in Friday's session.
Canada's currency gained 1.6% against its U.S. counterpart (USDCAD) , with one U.S. dollar buying C$1.0172 vs. C$1.0338 Thursday.