Loonie moves higher on election day in possible signal of Liberal minority

TORONTO — Canada's main stock index moved higher on election day with an appreciation in the loonie possibly signalling a Liberal minority government, says a markets analyst.

With the Bank of Canada not expected to lower interest rates, the Canadian dollar is up on anticipation of fiscal stimulus prompted by Liberal leader Justin Trudeau seeking the help of the New Democrats to form government, said Craig Fehr, Canadian markets strategist, Edward Jones.

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"If indeed Trudeau has to lean a little more left to form a coalition government...perhaps that means a little bit more deficit spending as a way to stimulate the economy," he said in an interview.

The Canadian dollar set a new three-month high as it traded for an average of 76.36 cents US compared with an average of 76.15 cents US on Friday.

"When we're talking minority government we're talking about much more gridlock, much more difficulty to get wide-sweeping legislation passed," he added.

Energy shares rose, a prospective signal of a Conservative government. However, energy shares also moved higher in the United States likely negating an election impact, said Fehr.

"To the extent that the Conservatives would gain power, that might suggest a little bit more favourability in Ottawa towards oil production."

The S&P/TSX composite index closed up 41.33 points at 16,418.45.

Ten of the 11 major sectors of the TSX closed higher led by technology, with the sector mirroring the movement in the United States on optimism of trade progress between the U.S. and China and the prospect of better-than-expected earnings results in the coming weeks.

Energy was the second-best sector, up nearly one per cent, as shares of Crescent Point Energy Corp. rose 1.8 per cent. Energy rose despite lower crude prices.

The December crude contract was down 36 cents at US$53.51 per barrel and the November natural gas contract was down 8.2 cents at US$2.24 per mmBTU.

Materials was the lone sector to fall, losing 1.7 per cent with Turqoise Hill Resources Ltd. and Yamana Gold Inc. down 4.9 and 4.3 per cent respectively on lower gold prices.

The December gold contract was down US$6.00 at US$1,488.10 an ounce and the December copper contract was up 1.05 cents at US$2.65 a pound.

In New York, the Dow Jones industrial average was up 57.44 points at 26,827.64. The S&P 500 index was up 20.52 points at 3,006.72, while the Nasdaq composite was up 73.44 points at 8,162.99.

U.S. markets rose Monday largely because quarterly results so far have come in ahead of expectations, while companies reporting this week including Amazon, McDonald's and Caterpillar Inc. are respective bellwethers in their sectors, said Fehr.

"So to the extent that earnings continue to come in better than expected I think that's a key catalyst for equities to move higher."

This report by The Canadian Press was first published Oct. 21, 2019.

Companies in this story: (TSX:CPG, TSX:TRQ, TSX:YRI, TSX:GSPTSE, TSX:CADUSD=X)

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