The Toronto Stock Exchange’s benchmark index topped the 20,000-point level for the first time ever this week fuelled by higher oil prices and more signs that a strong economic rebound from the depths of the COVID-19 pandemic is coming.
The S&P/TSX composite index was as high as 20,035 in the afternoon on Wednesday before closing just shy of the 20,000 level at 19,971.
The rally was broad-based, as financial firms, manufacturers, tech companies and the energy sector were almost uniformly higher.
Barry Schwartz, chief investment officer at Baskin Wealth, says the TSX’s rally makes sense since the index is home to all sorts of companies that have commodities that are very much in demand right now
“Lumber, a barrel of oil, copper, gold — anything you can drop onto your foot that would hurt is going up in price,” he said in an interview. “You open up the economy and things get back to normal [so] this is the TSX’s time to outperform,” he said.
A takeover battle in Canada’s pipeline industry added to the buying momentum, as Pembina Pipeline Corp. and Brookfield Infrastructure Partners are vying to buy Inter Pipeline in a three-way battle currently valuing the target firm at more than $8 billion.
At 20,000, the TSX has now gained more than 78 per cent from the low of 11,228 it closed at on March 23, 2020.
Shares in oil companies were up as the price of oil hit its highest point since October 2018, with a barrel of the North American crude benchmark known as West Texas Intermediate changing hands at more than $68 US a barrel. When markets closed on Wednesday, the WTI contract was going for $68.71.
Oil is higher on expectations that the world economy is slowly starting up again after the doldrums of the COVID-19 pandemic. If economies expand, they need more energy, which pushes up the price of oil.
Oil was higher despite the oil cartel known as OPEC announcing on Tuesday it would be releasing more barrels into the market — 2.1 million more barrels a day, to be exact, starting next month.
But the price rose because those barrels will easily be absorbed. “Demand growth is outpacing supply gains even with the agreed month-by-month OPEC+ production increases taken into account,” Ann-Louise Hittle, an oil strategist at energy research firm Wood MacKenzie said.
Edward Moya, a strategist at foreign exchange firm Oanda, said “oil prices seemed destined to continue to climb higher.”
Canadian energy stocks including Suncor, Crescent Point, Baytex and Canadian Natural Resources were all higher on oil’s surge
The Canadian dollar was similarly buoyed by oil’s strength, with the loonie changing hands at 83.09 cents US when stock markets closed on Wednesday. Although it has see-sawed above and below the 83-cent level for several days now, prior to this week, the loonie hadn’t topped 83 cents US since 2015.