TORONTO (Reuters) - Canada’s benchmark stock index added to a 19-month high on Thursday, led by heavyweight financial shares as bond yields climbed after the European Central Bank’s monetary policy decisions.
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended up 57.45 points, or 0.38 percent, at 15,295.20, its highest close since May 2015.
“There’s a lot of optimism on potentially reflationary forces back in the market,” said Youssef Zohny, portfolio manager at StennerZohny Investment Partners of Richardson GMP.
Investors are betting that the policies of U.S. President-elect Donald Trump, such as infrastructure spending, tax cuts and deregulation of banks, will stimulate the economy.
The index has rallied more than 32 percent since hitting a three-year low in January and is up more than 17 percent for the year. However, the strength of the recent rally may have left it vulnerable to a correction.
“It seems like markets maybe pulled forward a bit too much optimism,” Zohny said.
Financials gained 1 percent as bond yields rose after the European Central Bank said it would slow its stimulus program from April.
Higher bond yields reduce the value of insurance companies’ liabilities and increase net interest margins of banks.
Bank of Montreal (BMO.TO) added to sharp gains since reporting strong earnings earlier in the week. It rose 2 percent to C$95.02, while Manulife Financial Corp (MFC.TO) advanced 2.8 percent to C$24.36.
Oil producer Cenovus Energy Inc (CVE.TO) said it planned to increase its 2017 capital budget by about 24 percent and will resume work on the expansion of its oil sands project in Christina Lake.
Still, its shares fell 0.3 percent to C$20.48, while the overall energy group rose just 0.1 percent despite higher oil prices.
Energy has rallied for four straight weeks, including solid gains last week as members of the Organization of the Petroleum Exporting Countries agreed to cut output.
U.S. crude oil futures CLc1 settled up $1.07 at $50.84 a barrel on growing optimism that non-OPEC producers might also agree to output cuts. [O/R]
Crescent Point Energy (CPG.TO) advanced 1.4 percent to C$17.85 after saying it would increase its capital budget by 31 percent and boost production by 10 percent in 2017.
Four of the index’s 10 main groups ended lower, with the materials group, which includes precious and base metals miners and fertilizer companies, dipping 0.2 percent as a stronger U.S. dollar .DXY weighed on base and precious metal prices.
Gold futures GCc1 fell 0.4 percent to $1,170.6 an ounce. [GOL/][MET/L]
Additional reporting by Alastair Sharp; Editing by Lisa Von Ahn and James Dalgleish