TSX Closer: A Lower Close Amid Uncertainty Over Peace Talks; Rosenberg Research On Canadian Banks

-- The Toronto Stock Exchange was back in negative territory Thursday with both the Base Metals and Energy sectors lower, and amid reports Iran is still reviewing a peace proposal put forward by the United States, while the two nations wrestle over talks to end the war.

The S&P/TSX Composite Index closed down 125.2 points to 33,856.62, as Base Metals, down 1.7%, and Energy, down 1.4%, led decliners. In contrast, the Battery Metals Index led gainers, rising 7.8%.

Reflecting the overall negative tone to the market, the Financial sector lost 0.4% even as Rosenberg Research published a note entitled 'Canadian Banks: Quality at a Premium Price' in which it said secular market themes continue to support Canadian banks' premium valuations, as the sector benefits from rising global interest in non-U.S.-dollar, commodity-based economies.

Key takeaways from the note written by Mehmet Beceren, Senior Markets Strategist at Rosenberg, include the idea that Canadian banks are benefiting from more than bank fundamentals. As heavyweights in the Canadian equity index, the Big Six are getting a side benefit from global flows into Canada as investors seek exposure to hard assets, commodities, oil, gold, and non-U.S.-dollar markets, Beceren said.

Another takeaway is that the quality premium is defensible. "Valuations are not cheap relative to history, but high profitability and supportive thematic tailwinds justify higher multiples in a market that continues to re-rate quality earnings," Beceren added.

Of commodities, West Texas Intermediate crude oil fell for a third-straight session, but rose off the day's low on uncertain prospects for a potential peace deal between the United States and Iran. WTI crude oil for June delivery closed down $0.27 to settle at US$94.81 per barrel, after earlier touching US$89.85. July Brent oil was down $0.67 to US$100.60

Gold had risen for a third-straight session by midafternoon Thursday on optimism a deal to end the war on Iran may be near, cutting into oil prices and pushing the dollar lower amid easing fears the supply shock around the war would boost inflation and force higher interest rates. Gold for June delivery was up $20.60 to US$4,714.00 per ounce, after rising by US$125,80 on Wednesday.

US Natural Gas Update: Futures Rise on Small Storage Injection

US natural gas futures erased early losses and maintained higher prices in after-hours trade on Thursday after government data showed a smaller-than-expected increase in domestic gas inventories, triggering short covering and reinforcing expectations that the spring supply-demand balance may be tightening modestly.Both the front-month Henry Hub futures and the continuous contract rose 1.90% to $2.782 per million British thermal units.The US Energy Information Administration said natural gas inventories for the week ended May 1 rose by 63 billion cubic feet, below analyst expectations for a 72-80 Bcf build and under the five-year average increase of 77 Bcf for the week.The bullish storage surprise prompted buying in front-month contracts after futures had traded lower ahead of the report, Barchart said.Despite the smaller injection, supply levels remain ample. US gas inventories were 2.8% above year-ago levels and 6.7% above the five-year seasonal average.The Energy Buyers Guide said the market will likely be focused on "whether this storage miss was a one-off or a harbinger of a more durable shift in the underlying fundamental balance".Analysts at Gelber & Associates said the price lift "reinforced the idea that the spring balance is not quite as loose as consensus had assumed," the firm said, adding that the market still viewed the move as a near-term adjustment rather than the start of a sustained rally, noting that elevated inventories continue to limit upside potential for winter contracts."The rally is doing more to firm up summer risk than to meaningfully reprice next winter when storage remains above the five-year average," the firm said.Analysts also pointed to competing forces in the broader market, with strong LNG exports supporting prices while robust domestic production continues to weigh on sentiment.According to Barchart, citing data from BNEF, US lower-48 dry gas production on Thursday was estimated at 110.9 Bcf per day, up 4.5% from a year earlier. Demand across the lower 48 states was estimated at 71.0 Bcf/d, up 10.2% year over year.Flows to US LNG export terminals were estimated at 17.7 Bcf/d, down 5.9% from the prior week due to maintenance slowdowns.Gelber said the market can pop on a bullish storage surprise but still "needs either sustained heat, a more persistent slowdown in supply growth, or a string of smaller injections to make the move stick beyond the near-term contracts."

TSX Closer: A Lower Close Amid Uncertainty Over Peace Talks; Rosenberg Research On Canadian Banks

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US Natural Gas Update: Futures Rise on Small Storage Injection
US natural gas futures erased early losses and maintained higher prices in after-hours trade on Thursday after government data showed a smaller-than-expected increase in domestic gas inventories, triggering short covering and reinforcing expectations that the spring supply-demand balance may be tightening modestly.Both the front-month Henry Hub futures and the continuous contract rose 1.90% to $2.782 per million British thermal units.The US Energy Information Administration said natural gas inventories for the week ended May 1 rose by 63 billion cubic feet, below analyst expectations for a 72-80 Bcf build and under the five-year average increase of 77 Bcf for the week.The bullish storage surprise prompted buying in front-month contracts after futures had traded lower ahead of the report, Barchart said.Despite the smaller injection, supply levels remain ample. US gas inventories were 2.8% above year-ago levels and 6.7% above the five-year seasonal average.The Energy Buyers Guide said the market will likely be focused on "whether this storage miss was a one-off or a harbinger of a more durable shift in the underlying fundamental balance".Analysts at Gelber & Associates said the price lift "reinforced the idea that the spring balance is not quite as loose as consensus had assumed," the firm said, adding that the market still viewed the move as a near-term adjustment rather than the start of a sustained rally, noting that elevated inventories continue to limit upside potential for winter contracts."The rally is doing more to firm up summer risk than to meaningfully reprice next winter when storage remains above the five-year average," the firm said.Analysts also pointed to competing forces in the broader market, with strong LNG exports supporting prices while robust domestic production continues to weigh on sentiment.According to Barchart, citing data from BNEF, US lower-48 dry gas production on Thursday was estimated at 110.9 Bcf per day, up 4.5% from a year earlier. Demand across the lower 48 states was estimated at 71.0 Bcf/d, up 10.2% year over year.Flows to US LNG export terminals were estimated at 17.7 Bcf/d, down 5.9% from the prior week due to maintenance slowdowns.Gelber said the market can pop on a bullish storage surprise but still "needs either sustained heat, a more persistent slowdown in supply growth, or a string of smaller injections to make the move stick beyond the near-term contracts."

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