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Stocks, dollar advance after Trudeau re-election

FERGAL SMITH

Canada's main stock market rallied on Tuesday and the dollar edged higher against its U.S. counterpart, as the re-election of Prime Minister Justin Trudeau's Liberals reassured investors that the outlook for the economy would continue to improve.

The Toronto Stock Exchange's S&P/TSX composite index ended up 89.75 points, or 0.5 per cent, at 20,244.29, recovering from its lowest closing level in nearly two months the day before.

It was business as usual in Canada after Trudeau fell short of winning a parliamentary majority in a tightly contested federal election, leaving him dependent again on opposition legislators to govern.

The status quo was welcomed by the market, said Sadiq Adatia, chief investment officer at BMO Asset Management.

Investors are “happy to see that the economy will continue to move forward and the reopening plans will continue to move in the direction that's already in place,” Adatia said.

Although the Liberals were expected to retain power, their win suggests there's a good chance its plan to spend $78 billion over five years will take place even with a minority government, said Giles Marshall, portfolio manager at Fiduciary Trust Canada.

“The market may well have taken that positively that we're going to see both very loose monetary policy as far as the eye can see, combined with expansionary fiscal policy for the next several years for sure,” he said in an interview.

Gains for the TSX came as global financial markets stabilized following heavy selling on Monday.

Investors were assessing the level of contagion stemming from the distress of developer China Evergrande and were also awaiting Wednesday's interest rate decision by the U.S. Federal Reserve.

The Canadian dollar, which has largely been on the defensive since June, was trading 0.2 per cent higher at 1.2805 to the greenback, or US78.09 cents.

“Unlike most high-income countries, Canada is unlikely to embark on near-term fiscal consolidation,” Marc Chandler, chief market strategist at Bannockburn Global Forex, said in a note.

“A policy mix of tighter monetary policy and relatively looser fiscal policy tends to be supportive of the currency.”

The Canadian 10-year yield was up nearly 1 basis point at 1.232 per cent.

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2021-09-22T07:00:00.0000000Z

2021-09-22T07:00:00.0000000Z

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