North American markets and loonie rally on oil prices

TORONTO -- North American stock markets rallied strongly Tuesday, helped by rising oil prices and improved investor sentiment, while encouraging economic data from Ottawa gave the Canadian dollar a solid boost.

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Toronto's S&P/TSX composite index climbed 121.75 points to 12,982.10, capping a fourth straight day of gains.

Energy, metals and mining, utilities and financial stocks all helped the commodity-heavy index. Gold was the main drag, losing nearly five per cent.

Much of the strength was linked to another rise in oil prices after Russia hinted that a deal to cap oil production could be reached by OPEC countries later this month.

Saudi Arabia, Russia, Venezuela and Qatar have supported the idea of limiting supply, with the aim of boosting prices, but have said it is conditional on agreement by other producers. So far, Iran has refused to go along, saying it wants to return to pre-sanction production levels.

Even so, Sadiq Adatia, chief investment officer at Sun Life Global Investments, says word of an impending deal is enough to quiet some investor fears that oil prices will fall much further.

It also is a sign that if the largest oil-producing countries can agree to a cap, then they might eventually also agree to a production cut.

"We're seeing step one here (towards a cut) as long as everyone participates," Adatia said.

The April contract for benchmark North American crude added 65 cents to settle at US$34.40 a barrel.

Higher oil prices are usually read by investors as a sign of strong economic growth.

The gain in crude also helped push the Canadian dollar higher, with the loonie adding on 0.65 of a U.S. cent to 74.55 cents U.S.

The currency was also helped after Statistics Canada reported that the economy expanded at an annual rate of 0.8 per cent in the final three months of 2015. Economists had expected real GDP would be flat in the fourth quarter.

In New York, indexes soared in the wake of a U.S. government report that construction spending reached its highest level in eight years in January, which traders saw as a solid vote in the strength of the economy.

The Dow Jones industrial average shot up 348.58 points or nearly three per cent to 16,865.08, the Nasdaq composite index jumped 131.65 points to 4,689.60 and the S&P 500 gained 46.12 points to 1,978.35.

Despite the current positive mood in stocks markets, Adatia cautioned that volatility will still linger for some time.

"People are getting a little optimistic considering we had a very bad start to the year," he said.

"As we start to see this year progress, there is a lot more volatility around the world and that's going to cause more angst. But we'll take these good days."

In other commodities, April natural gas gained three cents to US$1.74 per mmBtu. May copper was also positive, rising a penny to US$2.14 a pound, while April gold gave back $3.60 to US$1,230.80 a troy ounce.



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