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TSX surges, investors look to central banks for help
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TSX surges, investors look to central banks for help
TORONTO -- Resource stocks led the way to a surge of more than 200 points on the Toronto stock market Tuesday.
Commodity prices registered solid gains amid hopes that central banks will take action to keep the fragile global economic recovery on track and a strong report on American factory orders.
The S&P/TSX composite index jumped 253.14 points to 11,849.7 while the TSX Venture Exchange gained 29.43 points to 1,220.42.
The commodity-sensitive Canadian dollar rose 0.5 of a cent to 98.72 cents US.
New York markets moved higher in a shortened session.
U.S. markets were open for a half-day Tuesday and closed Wednesday for the U.S. Independence Day holiday.
The Commerce Department said factory orders increased 0.7 per cent in May after two consecutive months of declines. Core capital goods, such as machinery and computers, rose 2.1 per cent. That's better than the 1.6 per cent estimated in a preliminary report a week ago and is a good measure of companies' plans to invest.
However, manufacturing has slowed so far this year, hurt by declining consumer and business confidence and weaker global demand.
The Dow Jones industrials added 58.96 points to 12,930.35, the Nasdaq composite index gained 17.28 points to 2,968.51 and the S&P 500 index was up 7.13 points to 1,372.64.
Some analysts expect the European Central Bank to cut lending rates and the Bank of England to boost money in circulation at meetings later this week.
"The ECB will likely cut 25 basis points. I think that seems to be what is priced into the markets," said Sadiq Adatia, chief investment officer at Sun Life Global Investment.
"And I think that's a good move, it just helps signal the markets that things are going to be a little bit better and let's face it, they need some positive things."
There are also hopes that Japan and China will announce new stimulus measures.
Rising expectations for central bank help come at a time of heightened concerns that the U.S. economy could be stalling after the Institute for Supply Management said Monday that U.S. manufacturing shrank in June for the first time in almost three years.
"The previously pace-setting factory sector has obviously stumbled, bumped by global economic headwinds (the euro crisis being the epicentre) and more cautious domestic spending," said BMO Capital Markets senior economist Michael Gregory.
The Toronto stock market finished last week with a strong advance after Europe's leaders appeared to have finally come up with plans that show they are serious about restoring confidence in the eurozone.
Among other things, the plan allows European bailout funds to pump money directly into troubled European banks, rather than make loans to governments to bail out the banks. The move rescues the banks without putting strapped countries deeper in debt.
Traders also closely watched the impact of tighter sanctions starting July 1 by the U.S. and Europe against Iran over that country's nuclear program. Iran, OPEC's second-biggest producer, is finding fewer countries willing to buy its crude, which could pinch global supplies.
The August crude contract on the New York Mercantile Exchange surged $3.69 to US$87.44 a barrel, pushing the energy sector up 3.35 per cent. Suncor Energy (TSX:SU) was up $1.20 at C$30.64 while Cenovus Energy (TSX:CVE) ran ahead $1.79 to $34.16.
The base metals sector ran up 4.35 per cent as copper futures jumped eight cents to US$3.54 a pound. Teck Resources (TSX:TCK.B) rose $1.65 to C$33.18 while First Quantum Minerals (TSX:FM) was up $1.09 at $19.09.
Ivanhoe Mines Ltd. (TSX:IVN) and Aluminum Corp. of China (Chalco) say they've agreed to extend by 30 days the time for Chalco to make a proportional takeover bid for up to 60 per cent of SouthGobi Resources. The offer of $8.48 per share is subject to Canadian and Chinese regulatory approvals as well as Chalco shareholder approval. Ivanhoe stock was up 36 cents at $10.40.
Railway stocks advanced alongside mining stocks with Canadian National Railways (TSX:CNR) up 50 cents to $86.60 and Canadian Pacific Railway (TSX:CP) climbing $1.39 to $76.11.
The gold sector racked up a 2.5 per cent gain as bullion rose $21.80 to US$1,619.50 an ounce. Barrick Gold Corp. (TSX:ABX) climbed $1 to C$39.35 and Goldcorp Inc. (TSX:G) moved ahead $1.07 to $39.40.
Blue chips also supported the TSX with the financial sector ahead 1.3 per cent. Royal Bank (TSX:RY) climbed 98 cents to $53.14 and Manulife Financial (TSX:MFC) improved by 32 cents to $11.41.
European bourses were positive with London's FTSE 100 index ahead 0.54 per cent, Frankfurt's DAX advancing 0.66 per cent and the Paris CAC 40 up 0.47 per cent.
In corporate news, Research In Motion (TSX:RIM) chief executive Thorsten Heins says "there's nothing wrong with the company as it exists right now" and that he is confident it will get past the current challenges that have resulted in layoffs of about 5,000 people and faltering sales of its BlackBerry smartphones.
Heins made the comment in a CBC Radio interview, part of the company's efforts to convince customers and investors that it can survive the US$518-million quarterly loss announced last week.
Meanwhile, Barclays Capital has cut its rating on RIM stock to underweight from equalweight and RIM shares fell seven cents to $7.47.
Elsewhere, the chief executive of U.K. bank Barclays, Bob Diamond, quit his job Tuesday, the latest scalp in a financial markets scandal that has also seen the bank's chairman announce his intention to resign.
Barclays' management has come under fire since the bank was fined $453 million last week by U.S. and British regulators for submitting false reports on interbank borrowing rates between 2005 and 2009. Much of that activity originated from traders in Barclays Capital, the investment banking division which Diamond headed at the time.
The Canadian Press
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