North American markets post Santa Claus rally despite oil weakness while loonie falls

TORONTO -- North American markets posted a so-called Santa Claus rally on Monday despite another fall in the price of oil that dragged the loonie down to its lowest level since August 2003.

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The Toronto Stock Exchange's S&P/TSX index rose 10.08 points to end the day to 13,034.38 after adding 14 points on Friday.

Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, said the focus for investors now is on monetary policy in the wake of the interest rate hike by the U.S. Federal Reserve last week and how that could impact the price of oil.

He said the performance of the Toronto market could diverge from the returns on the New York markets over the next few weeks as investors weigh the impact of weak oil prices on the commodity-weighted Canadian index.

"I expect it will refocus back on earnings as we turn the page to next year," he said.

The Dow Jones average of 30 stocks rose 123.07 points to close at 17,251.62, the broader S&P 500 index advanced 15.60 points to 2,021.15 and the Nasdaq gained 45.84 points to 4,968.92.

Fehr said the returns looked like a Santa Claus rally, the seasonal gain in stock prices usually observed in the last two weeks of the year that some credit to Christmas bonuses and tax-loss selling and others to holiday goodwill along Bay and Wall Streets and vacation time for the most pessimistic Grinches on the trading desks.

Oil prices slid again, falling 25 cents to settle at US$35.81 per barrel. The price has plumbed 11-year lows since falling from above US$41 earlier this month after OPEC said it would maintain its near-maximum production levels for the next six months even as a worldwide supply glut shows no signs of easing.

Oil has dropped from a high above US$110 in July 2014 as OPEC and other producers have pumped up supply while demand from big consumers such as China has sagged.

"Perhaps the path of least resistance for oil prices in the very near term is lower until we see a decisive shift in one or the other, that being supply or demand," Fehr said.

The commodity-sensitive loonie fell 0.1 of a cent to 71.61 cents US, its lowest level since August 2003.

Fehr said there wasn't clear direction for the Canadian dollar in the near term.

"The Canadian economy is going to continue to face a mixture of headwinds and tailwinds, while there are far more tailwinds for the U.S. economy," he said.

In other commodities, the February gold contract rose $15.60 to US$1,080.60 per troy ounce, and the January contract for natural gas added 14.4 cents to end trading at US$1.911.



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