North American stock markets move higher on fading concerns about virus impact

TORONTO — North American stock markets started the week higher as investors shrugged off concerns about the economic impact of the novel coronavirus as Chinese factories start to reopen.

"As incremental news comes in — while it's certainly not as positive as anyone would like as we continue to see infections rise — I think the market's starting to come to a bit better grips of the potential economic impact," said Craig Fehr, Canadian markets strategist, Edward Jones.

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There have been 908 deaths among 40,171 confirmed cases in China. Seven cases of the virus have also been confirmed in Canada, four of them in British Columbia and three in Ontario.

"We are a long way from having a concrete understanding of just how impactful that will be on global growth but the market seems to be digesting it better today than it has in the initial stages of the outbreak," he said in an interview.

Investors gained comfort over the weekend on reports about factory reopenings, including iPhone maker Foxconn.

The S&P/TSX composite index closed up 85.08 points at 17,740.57.

In New York, the Dow Jones industrial average was up 174.31 points at 29,276.82. The S&P 500 index was up 24.38 points at 3,352.09, while the Nasdaq composite was up 107.88 points to a record close of 9,628.39.

The Canadian dollar traded for 75.08 cents US, down from an average of 75.16 cents US on Friday.

Nine of the 11 major sectors on the TSX were higher, led by technology, consumer discretionary and materials.

Shopify Inc. gained 2.8 per cent to help technology, which was strong in the U.S. and helped push Nasdaq to a record high.

Consumer discretionary was helped by Restaurant Brands International Inc., whose shares gained 3.1 per cent after posting fourth-quarter and 2019 results.

Yamana Gold Inc. shares climbed 2.75 per cent, helping the materials sector on higher gold prices.

The April gold contract was up US$6.10 at US$1,579.50 an ounce and the March copper contract was down 0.25 of a cent at US$2.55 a pound.

Health care lost almost two per cent with Aurora Cannabis Inc. down about eight per cent.

Energy was slightly higher with Suncor Energy Inc. and Enbridge Inc. gaining more than one per cent despite crude oil prices falling below US$50 per barrel to its lowest level since January 2019.

The March crude contract was down 75 cents at US$49.57 per barrel and the March natural gas contract was down 9.2 cents at US$1.77 per mmBTU.

The weakening economic story in China from the virus is likely to diminish demand for oil.

"What we're likely to see is some of the Q1 data come out is going to show that the Chinese economy was hit rather hard by this," said Fehr.

Not only will industrial production slow from factory closures, but there will likely be a meaningful drop in consumption as people avoid going out to eat or participate in leisure activities.

However, the impact is likely to be temporary, he said.

"We'll see how much of this slowdown bleeds over into Q2 but at this stage I think the market is coalescing around the idea that the brunt of this impact is going to show up in Q1."

The virus will remain a concern for investors this week but they'll watch the semi-annual congressional testimony from Federal Reserve Chairman Jerome Powell on Tuesday and Wednesday.

"I don't expect any fireworks to come from that but I think the markets will look to see just how much the Fed is acknowledging some of the potential global growth impact and U.S. growth impact that's coming from this virus."

This report by The Canadian Press was first published Feb. 10, 2020.

Companies in this story: (TSX:HSE, TSX:ACB, TSX:ENB, TSX:SU, TSX:GSPTSE, TSX:CADUSD=X)

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