North American stocks end up as China-U.S. trade war worries ease

Strength in the energy sector helped push Canada's main stock index to triple-digit gains Thursday as worries about a trade war between China and the United States eased.

"What we're seeing today is really some encouraging developments on the whole U.S.-China debacle," said Candice Bangsund, vice president and a portfolio manager at Global Fiera Capital Corp.

U.S. officials have signalled a willingness to return to the negotiating table after China rapidly matched US$50 billion in U.S. tariff threats with a list of their own.

The response was seen as more aggressive than the market was expecting, but the combination of assertiveness with a measured response helped increase the appetite for negotiations, said Bangsund.

"Really it did work to get the U.S. officials to sort of soften their tone and walk back...Policymakers seem really intent on finding a compromise, which has really helped to ease fears for that full-blown trade-war scenario, and really rekindled the risk-on trade today."

The increased risk appetite helped drive up equity prices in general, but especially cyclical sectors like energy, materials, industrials, and financials that dominate the TSX, said Bangsund.

In the end, the S&P/TSX composite index closed up 191.68 points or 1.26 per cent at 15,356.05, led by energy and base metals.

The higher emphasis of the TSX on cyclical sectors also meant it outperformed U.S. indexes, which all gained less than a per cent.

In New York, the S&P 500 index ended up 18.15 points at 2,662.84. The Nasdaq composite index was up 34.44 points at 7,076.55, and the Dow Jones industrial average closed up 240.92 points at 24,505.22.

The higher gains of the TSX marked a shift from the tougher market it has faced amid economic uncertainty, said Bangsund.

"The TSX has been unfairly punished basically because a lot of the headline risks out there, be it NAFTA or elevated debt levels, or the widening oil differentials. So there's a lot kind of overhanging the TSX, but a day like today is obviously going to close that a little bit."

The Canadian dollar also saw a small gain today, up 0.20 of a US cent to average 78.27 cents US, even as trade data disappointed.

Statistics Canada said Thursday that Canada had a trade deficit of $2.7 billion in February, higher than the $2 billion economists had expected according to Thomson Reuters.

The negatives on trade were balanced by positive news elsewhere, including on trade and energy, said Bangsund.

"The trade numbers came in worse than expected, so higher deficit than consensus forecasts, but at the same time this afternoon you're hearing some positive developments on the NAFTA front, with Trudeau being optimistic that a deal can be done."

The May crude contract closed up 17 cents at US$63.54 and the May natural gas contract was down four cents to US$2.67 per mmBTU.

The June gold contract was down US$11.70 to US$1,328.50 an ounce and the May copper contract was up six cents to US$3.07 a pound.