Stock market outlook positive; oil back over US$126 an ounce

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(The Canadian Press)

By The Canadian Press

TORONTO - European stock markets and Wall Street index futures were solidly positive Friday morning, maintaining momentum that has left the S&P/TSX composite index are a record level and the U.S. Standard and Poor's 500 index at a five-month high.

Oil prices surged back over US$126 a barrel amid the expiry of options and rumours that extra Chinese demand for diesel fuel to run emergency power generators after this week's deadly earthquake may tighten the distillates market.

Oil was up $2.37 to $126.49 on the New York Mercantile Exchange during what a research note from U.S. energy risk management firm Cameron Hanover characterized as "one of those volatile days that we fully expect to see more of in the days and weeks ahead."

Gold advanced $7.80 to US$887.80 an ounce.

The Canadian dollar opened at 99.92 cents US, off 0.08 cent, after closing at parity against the greenback on Thursday for the first time since mid-March.

In Canadian corporate news, Rothmans Inc. (TSX: ROC.TO) grew its full-year earnings by 18 per cent to $117.6 million as net sales at subsidiary Rothmans, Benson & Hedges Inc. rose eight per cent to $670.6 million thanks to price increases as volume rose 0.2 per cent.

Pacific Rubiales Energy Corp. (TSX: PEG.TO) reported a 76 per cent rise in first-quarter net sales to US$94.9 million, but stock-option expense and an unrealized foreign exchange loss dropped the Toronto-headquartered Colombian oil producer to a net loss of $53.2 million.

Questerre Energy Corp. (TSX: QEC.TO) said Talisman Energy Canada (TSX: TLM.TO) has decided to drill three option wells under its farm-in agreement with Questerre in the St. Lawrence Lowlands of Quebec.

And the proposed $16.2-billion Mackenzie Valley natural gas pipeline is reported to have been set a regulatory setback. The Globe and Mail says a government environmental panel won't report until sometime next year, instead of in October.

On overseas stock markets Friday, the FTSE 100 index was up 1.2 per cent early in the afternoon in London, while Germany's DAX index advanced 1.6 per cent and the Paris CAC 40 was up 0.8 per cent.

Tokyo's Nikkei index slipped 0.2 per cent to 14,219.48, after climbing more than four per cent in the previous four sessions.

Japan's economy grew at a stronger-than-expected annual rate of 3.3 per cent in the first quarter, its third consecutive quarter of growth.

But analysts warned that the world's second-largest economy is almost certain to slow in coming months, largely because of high oil and food prices, and slowing corporate investment.

"The appearance of good news is actually partly false," said Kenichi Kawasaki, an economist at Lehman Brothers in Tokyo.

Hong Kong's Hang Seng index climbed 105.15 points or 0.4 per cent to 25,618.86, lifted by Wall Street's overnight strength and an analyst upgrade of Li Ka-shing's Cheung Kong property group.

In mainland China, shares slipped on profit-taking in electric utilities and steel companies. The Shanghai composite dipped 0.4 per cent to 3,624.23.