TSX posts gain as oil rebounds

TORONTO -- The Toronto stock market posted a solid gain Tuesday as oil rebounded slightly from recent lows.

At the close, Toronto's S&P/TSX composite index was up 48.48 points at 13,082.86, adding to a tiny gain on Monday in the final trading week before the Christmas holiday period.

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Kash Pashootan, senior vice-president and portfolio manager at First Avenue Advisory, a Raymond James company, said the longer-term picture for the Toronto market still looks bleak despite the occasional rally.

Energy and mining companies are heavily weighted on the TSX and Pashootan said the underlying fundamentals of the oil, gas and metals markets are negative because of a sputtering world economy and falling demand from China.

"In the last three to six months we've seen oil and the market have a handful of these mini-rallies," he said.

"Every time they've been short-lived and prices have gone back to trading on fundamentals, which don't look healthy."

Pashootan said investors shouldn't be surprised to see Canada slip into a recession next year if commodities continue to bite and the fallout hits the big banks that lend to the oilpatch and other commodity producers.

"We're going to live and die by what happens in the commodities and the financials on the TSX next year," he said.

In New York, the Dow Jones average of 30 stocks shot up 165.65 points to close at 17,417.27, while the broader S&P 500 index added 17.82 points to 2,038.97 and the Nasdaq gained 32.19 points to 5,001.11.

North American markets are returning to fair prices after years of over-inflated returns, Pashootan said.

"As a result, you're going to see more volatility in 2016 than we've been used to the last few years, and you're going to see less returns than we've been used to as well," he said.

The February contract for benchmark crude oil rose 33 cents to settle at US$36.14 a barrel, and the commodity-sensitive loonie added 0.14 of a cent to end the day at 71.75 cents US.

Pashootan noted than an unseasonably mild December across much of North America is one more problem for the oil market which, along with falling Chinese demand and tepid global growth, is already reeling from oversupply fed by OPEC's commitment to full tilt production despite the slide in oil prices.

"If you're an oil investor, a mild winter is the last thing you want because there's already enough on your plate to put downside pressure on oil already," he said. "It's another side dish to this mess of a situation."

In other commodities the January contract for natural gas dropped 2.3 cents to US$1.888 per mmBtu and the February gold contract fell $6.50 to US$1,074.10 per troy ounce.


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