North American stock markets set record highs after China cuts tariffs in half

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USA and Canada. USA flag and Canada flag © Marian Vejcik /123RF Stock PhotosNorth American stock markets marched to record highs Thursday on dissipating virus risks and China saying it would cut tariffs on U.S. imports in half.

After two risk-on days, investors have sunk more money into defensive sectors such as telecommunications, consumer staples, real estate investment trusts, gold and utilities in both Canada and the U.S.

“Those sectors are doing the heavy lifting today and that’s partially market participants still obviously wanting to get equity exposure but maybe taking a bit of a breather from some of the industrials and financials and tech stocks that have worked very well so far this week,” said Mike Archibald, vice-president and portfolio manager with AGF Investments Inc.

Stock markets rose for a fourth-straight day with the Toronto stock market up 2.5 per cent since Friday and U.S. markets up 3.7 to 4.6 per cent.

“This is largely due in part to the markets sort of resetting their level of concern over the outbreak in Asia and the number of cases looking like it’s starting to slow which is part of the reason obviously we sold off last week.”

The S&P/TSX composite index closed up 105.90 points to 17,757.49. That’s a record close after hitting an all-time intraday high of 17,758.49.

In New York, all three markets set intraday and closing records with the Dow Jones industrial average up 88.92 points at 29,379.77. The S&P 500 index was up 11.09 points at 3,345.78, while the Nasdaq composite was up 63.47 points at 9,572.15.

The Canadian dollar traded for 75.24 cents U.S. compared with an average of 75.25 cents U.S. on Wednesday.

The defensive sectors led as eight of the 11 major sectors of the TSX were higher.

Higher metal prices pushed materials up with Eldorado Gold and Barrick Gold Corp. gaining 2.7 and two per cent respectively.

The April gold contract was up US$7.20 at US$1,570.00 an ounce and the March copper contract was up 1.85 cents at US$2.59 a pound.

Health care lost 1.8 per cent on pressure from cannabis producers such as Aurora Cannabis Inc., whose shares fell 5.7 per cent. The company announced after markets closed the layoff of 500 employees and the retirement of its CEO.

Energy dropped despite higher crude oil prices as Suncor Energy Inc. was down 3.7 per cent after posting unspectacular results.

“Energy and copper have been the two macro asset classes that have been hit the worst on this virus outbreak so we should definitely see a bounce here in the energy price to the extent that the virus is contained, which I think it is,” Archibald added.

The March crude contract was up 20 cents at US$50.95 per barrel and the March natural gas contract was up one tenth of a cent at US$1.86 per mmBTU.

In addition to easing concerns about the new coronavirus, investors have been calmed by stimulus from China’s central bank and the overnight announcement that it would back off on some tariffs.

“Every incremental news point we’re getting lately has been decidedly positive outside of this coronavirus and all the economic data is continuing to improve, so stock markets should be making new highs,” he said.

U.S. productivity rebounded in the final three months of last year, helping to boost productivity growth to 1.7 per cent for the year, the best showing in nearly a decade.

In a separate report, the Labor Department said that the number of Americans filing new claims for unemployment benefits claims fell by 15,000, to the lowest level since last April. The government will release the January jobs report on Friday.

“The fundamentals are getting much better globally and I think that should be conducive to keeping the multiples higher and higher earnings in the future.”

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