Markets soared on Monday following the announcement of a 90-day truce in the U.S.-China trade war, triggering a global rally with Wall Street leading the charge and Canadian stocks rising more modestly in comparison. While the S&P/TSX composite index gained 174.44 points to close at 25,532.18, it had earlier jumped more than 370 points above Friday’s close before paring back some gains.
John Zechner, chairman and lead equity manager at J. Zechner Associates, said the Canadian market lagged behind its U.S. counterpart due to its defensive composition. “It’s a risk-on day, so Toronto’s got more defensive sectors,” he explained.
In contrast, American markets surged. The Dow Jones industrial average leapt 1,160.72 points to close at 42,410.10, the S&P 500 rose 184.28 points to 5,844.19, and the Nasdaq soared 779.43 points, or 4.4 per cent, to finish at 18,708.34.
Zechner noted that heading into the weekend, expectations were low regarding the U.S.-China negotiations. However, the breakthrough announcement — where both countries agreed to lift most tariffs for 90 days — sparked renewed investor optimism. “That was something to really set the bulls going,” he said.
While the rally lifted tech, travel, and apparel stocks hardest-hit by previous trade tensions, Zechner cautioned that long-term sustainability would depend on broader economic data, particularly around inflation and employment. “Our heads are still spinning. We don’t know where this ends up,” he added.
On Bay Street, tech, energy, and base metals led the gains. However, gold stocks plummeted as investors rotated out of safe-haven assets. The June gold contract tumbled US$116 to settle at $3,228 an ounce, dragging down major miners. Lundin Gold Inc. dropped 18 per cent, Iamgold Corp. fell 10 per cent, and Allied Gold Corp. slipped nine per cent.
Meanwhile, the July copper contract dipped three cents to US$4.62 a pound. Oil showed strength, with the June crude contract up 93 cents to US$61.95 per barrel, while June natural gas slipped 15 cents to US$3.65 per mmBTU.
The Canadian dollar also edged lower, closing at 71.44 cents US, down from 71.80 cents on Friday.