North American stock markets rise on easing of U.S. banking capital restrictions

North American stock markets rise on easing of U.S. banking capital restrictions

TORONTO — North American stock markets moved higher Thursday as the banking sector was helped by an easing of restrictions on its use of capital.

The U.S. banking sector and several large Canadian banks climbed on announced changes to the so-called Volcker Rule, put in place to curtail excesses that led to the 2008 financial crisis.

The old rule, named after former Federal Reserve chairman Paul Volcker, curtailed the ability of banks to make investments in such areas as hedge funds. The change to take effect Oct. 1 could free up billion of dollars in capital for the banking sector.

“That may be having a spillover effect on a couple of the Canadian banks as both Royal and TD do have fairly significant U.S. banking operations right now,” said Kevin McLachlan, portfolio manager at Fiduciary Trust Canada, part of Franklin Templeton Canada.

Canada’s heavyweight financials sector gained about one per cent, with shares of Royal Bank of Canada up 1.6 per cent and TD 1.1 per cent higher.

Ten of 11 major sectors on the TSX were higher on the day, the lone exception being consumer discretionary, which fell slightly.

Technology and industrials led with Lightspeed POS Inc. up 3.5 per cent and Shopify Inc. gaining 2.5 per cent. Canada’s railways, both CN and CP Rail, moved higher.

Overall, the S&P/TSX composite index closed up 151.76 points at 15,446.14 after hitting an intraday low of 15,178.35.

In New York, the Dow Jones industrial average was up 299.66 points at 25,745.60. The S&P 500 index was up 33.43 points at 3,083.76, while the Nasdaq composite was up 107.84 points at 10,017.00.

The energy sector rose 0.53 per cent on higher crude oil and natural gas prices with Cenovus Energy Inc. and Husky Energy Inc. up 1.9 and 1.8 per cent, respectively.

The August crude contract was up 71 cents at US$38.72 per barrel and the August natural gas contract was down 11.5 cents at nearly US$1.55 per mmBTU.

McLachlan said crude oil prices rose despite high U.S. inventories because demand for refined products such as gasoline, diesel and jet fuel climbed.

Gold prices moved lower, but the materials sector was up 0.75 per cent with Ivanhoe Mines Ltd. gaining 3.8 per cent and First Quantum Minerals Ltd. up 3.5 per cent.

The August gold contract was down US$4.50 at US$1,770.60 an ounce and the July copper contract was up 1.25 cents at US$2.66 a pound.

North American stock markets closed higher after treading water earlier in the session as investors were concerned by rising COVID-19 infections in several U.S. states.

“Obviously the rise in the new data, cases of COVID-19 in the U.S. is something that, not just the U.S. markets, but the Canadian markets are keeping an eye on,” McLachlan said in an interview.

Initial U.S. jobless claims continued to decrease last week, but the 1.48 million people seeking benefits was still high by historical standards and exceeded analyst forecasts.

The Canadian dollar traded for 73.29 cents US compared with 73.58 cents US on Wednesday.

The decrease came a day after Fitch Ratings stripped Canada of its triple-A credit rating over what it called “the deterioration of Canada’s public finances” due to the COVID-19 pandemic.

This report by The Canadian Press was first published June 25, 2020.

Companies in this story: (TSX:CNR, TSX:CP, TSX:LSPD, TSX:SHOP, TSX:CVE, TSX:HSE, TSX:RY, TSX:TD, TSX:IVN, TSX:FM, TSX:GSPTSE, TSX:CADUSD=X)

Ross Marowits, The Canadian Press

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