Canada's main stock index jumped on Friday as investors cheered the Bank of Japan's bold move to stimulate growth, while rising oil prices and an accommodative royalty update in Alberta boosted energy stocks. The Toronto Stock Exchange's S&P/TSX composite index ended up 230.20 points, or 1.83 percent, at 12,822.13.
It gained 3.4 percent on the week, a second strong weekly performance after touching its lowest since August 2012 earlier in the month. It lost 1.4 percent in January. All 10 main groups rose at least 1.2 percent, with sentiment helped by the Bank of Japan unexpectedly cutting a benchmark interest rate below zero in a bid to overcome deflation, using an aggressive policy pioneered by the European Central Bank.
The energy sector gained 1.3 percent as the oil and gas industry in Canada, home to the world's third-largest crude reserves, cheered a review of royalties in Alberta that kept rates unchanged on existing oil wells and oil sands projects. "We are getting a little bit more clarity as to how those royalty streams are going to be taxed and paid," said Kevin Headland, a director in the portfolio advisory group at Manulife Asset Management.
"Clarity is always good for the equity markets, especially when the clarity is on a good news front for the energy patch." Canadian Natural Resources ended up 2.8 percent at C$29.99 and Suncor Energy Inc rose 1.1 percent to C$33.18. The broad rally echoed larger gains on Wall Street after weak GDP data raised expectations that the US Federal Reserve would go slow on future interest rate hikes.
Oil prices rose further, rebounding more than 25 percent from 12-year lows hit last week, on prospects of a deal between major exporters to cut production and curb one of the biggest supply gluts in history. Investors should still be cautious about Canadian equities even though they appear broadly cheaper than US peers, warned Shailesh Kshatriya, director of strategy at Russell Investments Canada, given an uninspiring economy backdrop.
"It's price to earnings, and how valid is that forward earnings component," he said. "Herein lies the uncertainty for the Canadian equity markets as well," he said. Valeant Pharmaceuticals International rose 6.6 percent to C$129, recovering some of its losses since US Democratic presidential candidate Hillary Clinton criticized exorbitant pricing for one of the company's drugs while on the campaign trail.
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