Canada’s benchmark stock index closed above the 20,200 level for the first time on Tuesday, even as U.S. stocks sagged, as a 2% spike in oil prices to their highest in more than two years energized the energy sector.
The performance among stocks linked to commodities was uneven, however, as copper stocks tumbled on another pullback in the price of the red metal.
The S&P/TSX Composite Index has risen in seven of the last eight trading sessions. On Tuesday, it closed up 73.67 points, or 0.37%, at a record high close of 20,231.32.
The energy sector rose 2.23%, while materials - which includes both gold and copper miners - lost 1.35%. Taseko Mines and Copper Mountain Mining both lost more than 8%.
Uranium stocks made a partial recovery from Monday’s selloff, with Cameco gaining about 5%.
Brent crude rose $1.13, or 1.6%, to settle at US $73.99 a barrel. The global benchmark during the session hit $74.07 a barrel, its highest since April 2019. U.S. oil rose $1.24, or 1.8%, to settle at $72.12 a barrel. It hit a session high of $72.19 a barrel, its highest since October 2018.
Oil prices were buoyed by expectations demand will recover rapidly in the second half of 2021. The world’s biggest oil traders said on Tuesday they see oil prices staying above US$70 a barrel with demand expected to return to pre-pandemic levels in the second half of 2022.
Vitol Chief Executive Russell Hardy sees the oil moving between $70 and $80 a barrel for the remainder of 2021 on the expectation that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) keep supply discipline, even as Iran’s exports may resume if the United States rejoins a nuclear agreement with Tehran.
“We have had those stock draws for a couple months, the market is heading in the right direction,” Russell Hardy told the FT Commodities Global Summit.
Trafigura Chief Executive Jeremy Weir told the same event there was a good chance prices could reach US$100 a barrel because of falling reserves before the world reaches peak oil demand.
Copper prices slid to seven-week lows as traders and funds cut bets on higher prices due to growing nervousness that top consumer China would soon move to curb further price rises.
Benchmark copper on the London Metal Exchange was down 4.3% at $9,540 a tonne in afternoon trading. Prices of the metal used in the power and construction industries have dropped more than 8% since touching a record high at $10,747.50 on May 10.
The sell-off started overnight as Chinese traders came back from a long weekend. Copper prices falling below the 50-day moving average around $9,781 accelerated the sell-off.
China’s state planner last week renewed its pledge to step up monitoring of commodity prices, as domestic producer inflation hit its highest in more than 12 years.
Shanghai Metal Exchange Market and Chinese analysts said China plans to release state reserves of nonferrous metals copper, aluminum and zinc in a program set to last until the end of 2021.
In other commodities, the August gold contract was down US$9.50 at US$1,856.40 an ounce.
On Wall Street, the main indexes ended lower, as data showing stronger inflation and weaker U.S. retail sales in May unnerved investors who were already jittery as they await the results of the Federal Reserve’s latest policy meeting.
Assurance from the Fed that rising prices are transitory and falling U.S. Treasury yields have helped ease some concerns over inflation and supported U.S. stocks in recent weeks. All eyes are now on the central bank’s statement at the end of its two-day policy meeting on Wednesday.
Data showed an acceleration in producer prices last month as supply chains struggled to meet demand unleashed by the reopening of the economy. A separate report showed U.S. retail sales dropped more than expected in May.
“There was a bit of a reaction to the economic data we got, which, for the most part, shows that the economy is starting to wean itself off stimulus, the recovery is slowing down a little, and inflation is continuing to grow,” said Ed Moya, senior market analyst for the Americas at OANDA.
“We’re seeing some very modest weakness, and it’ll be choppy leading up to the Fed decision. Right now, the Fed is probably in a position to show they are thinking about tapering, but they’re still a long way from actually doing it.”
The Fed is likely to announce in August or September a strategy for reducing its massive bond buying program, but will not start cutting monthly purchases until early next year, a Reuters poll of economists found.
The benchmark S&P 500, the blue-chip Dow Jones and the tech-focused Nasdaq have all gained so far this year, largely driven by optimism about an economic reopening.
However, the S&P 500 has been broadly stuck within a range, despite recording its 29th record-high finish of 2021 on Monday, versus 33 for all of last year.
Unofficially, the Dow Jones Industrial Average fell 91.92 points, or 0.27%, to 34,301.83, the S&P 500 lost 8.29 points, or 0.19%, to 4,246.86 and the Nasdaq Composite dropped 101.29 points, or 0.71%, to 14,072.86.
The majority of the 11 major S&P sectors slipped. The energy index rose as oil prices hit multi-year highs on positive demand outlook.
The communication services sector ended lower, having hit a record intraday high earlier in the session.
In corporate news, Boeing Co gained after the United States and the European Union agreed on a truce in their 17-year conflict over aircraft subsidies involving the planemaker and its rival Airbus.
Having slumped 19% on Monday, Lordstown Motors Corp shares rallied after comments from the electric truck manufacturer’s president on orders.
With files from Reuters
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