The Toronto Stock Exchange on Thursday posted its first wining session in six, recovered all the 630 points and more lost over the prior five sessions, on some bargain hunting and a first-quarter rebound for the Canadian economy.
The S&P/TSX Composite Index rose 645.94 points, or 1.9% to close at 33,964.33, with most sectors higher, led by Base Metals, up near 3%, even with gold prices deflated. Even Energy was up 0.8%, despite lower oil prices.
The Battery Metals Index lost 2.7%.
On the economy, Derek Holt, Head of Capital Markets Economics at Scotiabank noted Canada's economy rebounded in Q1 and "might be performing a smidge better" than the Bank of Canada's published forecast yesterday. "Still," Holt said, "it's backward data that settles nothing much other than to reject gloomier consensus views on the underlying performance of the economy coming into the start of the year."
Holt noted the economy grew by 0.17% month over month seasonally-adjusted, rounded up to 0.2% on screens. Statcan's preliminary guidance for March was that GDP was unchanged, absent any details. What this translates into is Q1 GDP tracking growth of 1.7% on a quarter over quarter SAAR (Seasonally Adjusted Annual Rate), a rebound from the 0.3% q/q SAAR contraction in Q4, "with an asterisk beside both readings", Holt added.
That asterisk speaks to the fact that we're using monthly, production-side GDP accounts, Holt said. The BoC and the street focuses upon more complete quarterly GDP accounts that also consider how activity was generated, such as by considering swings in inventory investment, he added.
Holt said the difference may be material. Q4 GDP in expenditure-based terms shrank by -0.6% q/q SAAR because inventory depletion drove a 4.2 percentage point weighted drag against GDP economy. Final domestic demand excludes inventory effects and it grew by 2.3% q/q SAAR in Q4. "We don't have the complete inventory and trade picture for Q1 yet and so there continues to be some tracking risk," Holt added.
Holt cited a chart that shows what drove February GDP. Manufacturing punched above its weight while the rest was an evenly distributed mixture of small growth additions and drags, he said. Some of the drags were weather oriented in his view, like construction, and maybe some of the leisure categories, he added.
So, while GDP rebounded, it likely outpaced the supply side of the economy which will probably translate into a narrower output gap when we get the full set of Q1 GDP accounts, according to Holt.
Of commodities, gold traded higher by midafternoon Thursday as the dollar dropped after a report showed a key U.S. inflation measure rose last month, while first-quarter gross domestic product rose less than expected. Gold for June delivery was up US$71.30 to US$4,632.80 per ounce, remaining within the US$200 range it has traded within for the past month.
But West Texas Intermediate crude oil closed lower, falling off four-year highs touched overnight during Asian trade on a report the U.S. may end the ceasefire with Iran as the largest-ever supply shock hits hardest for the continent that relies on Persian Gulf supplies now trapped behind the closed Strait of Hormuz. WTI crude oil for June delivery closed down US$1.81 to settle at US$105.07 per barrel after touching US$110.93 overnight, while June Brent oil was last seen down US$4.12 to US$113.91, after it reached US$126.34 overnight, the highest since 2022.