TORONTO — The financial sector helped push the Toronto stock market sharply higher Wednesday amid reports that European Union officials are examining plans help banks better withstand fallout from the eurozone’s government debt crisis.
In an interview with the Financial Times, European Commissioner Olli Rehn hinted at a possible bank recapitalisation plan but didn’t provide any details.
The S&P/TSX composite index surged 198.49 points to 11,376.4 while the TSX Venture Exchange rose 34.66 points to 1,354.98.
Investors have been concerned over the last couple of months about the slowing pace of economic revival and a possible debt default by Greece, which would worsen economic conditions and cause havoc on the European financial sector.
Recapitalising eurozone banks could limit the damage to the financial system should the Greek government default.
An increased appetite for risk sent the Canadian dollar up 0.39 of a cent to 95.19 cents US.
U.S. markets were also supported by positive economic data, with the Dow Jones industrial average ahead 22.86 points to 10,831.57. The Nasdaq composite index rose 10.1 points to 2,414.92 while the S&P 500 index was up 3.69 points to 1,127.64.
The Institute for Supply Management’s non-manufacturing index showed the services sector continuing to expand during September. It came in at 53, which met expectations and was just slightly lower than the August reading.
Meanwhile, the International Monetary Fund is pushing for radical changes in the way the eurozone’s debt crisis should be handled.
Antonio Borges, the head of the IMF’s Europe program, said the eurozone’s bailout fund should get more firepower and new tools. To help, he said the IMF could intervene in bond markets to keep the crisis from engulfing large economies like Italy and Spain
Franco-Belgian bank Dexia was in the spotlight once again Wednesday amid mounting expectations that it will be broken up somehow, possibly as soon as Thursday.
Dexia has been at the forefront of investor concerns over its exposure to potentially bad debt from Europe’s most indebted countries. Investors are concerned about what bonds Europe’s banks are holding, and banks themselves have become reluctant to lend to one another.
An announcement that ratings agency Moody’s Investor Services had downgraded Italy’s debt by three notches to A2 was taken in stride on financial markets. Moody’s cited high debt, a weak global economy and political uncertainties.
Markets failed to find much lift from positive employment data two days before the release of the U.S. government’s non-farm payrolls report for September. Economists hope the economy created around 55,000 jobs.
On Wednesday, payrolls firm Automatic Data Processing said that the U.S. private sector added 91,000 jobs last month.
The financials sector was up 1.43 per cent in the wake of the Financial Times report. Royal Bank was up 39 cents to $46.34 and TD Bank rose $1.03 to $72.17.
The energy sector gained 2.21 per cent as hopes for improving demand prospects sent the November crude contract on the New York Mercantile Exchange ahead $2.11 to US$77.78 after losing almost $2 on Tuesday to its lowest close since September 2010. Suncor Energy was up $1.12 to C$26.55 and Cenovus Energy gained 94 cents to $31.34.
Other commodities were mixed with December gold in New York ahead $3.60 to US$1,619.60 an ounce, leaving the gold sector up 1.42 per cent. Barrick Gold Corp. rose 50 cents to C$47.64 and Goldcorp Inc. climbed $1.22 to $47.16.
The base metals sector was 2.4 per cent higher while December copper prices were down seven cents at US$3.04. Teck Resources climbed $1.20 to C$32.19 and HudBay Minerals was ahead 23 cents to $10.28.
The TSX has closed lower for the past three days, leaving Canada’s biggest stock market in bear market territory, down 22 per cent from its 2011 highs from early March.
Commodity prices have taken a huge hit since early August when investors started to get concerned that global growth was faltering and there was a growing possibility that economies could slide back into recession.
That in turn has resulted in large losses in energy and mining companies on the resource-heavy TSX as oil prices have slid about 20 per cent in the last two months while copper has plunged 31 per cent.
Copper is widely viewed as a barometer for the health of the overall global economy since it is used in electronics, homes and infrastructure.
In Asia, Japan’s Nikkei index closed 0.9 per cent lower and Korea’s Kospi index ended 2.3 per cent down.
Stock markets in Hong Kong and mainland China were closed for a holiday.
European bourses advanced with London’s FTSE 100 index up 2.81 per cent, Frankfurt’s DAX gained 4.48 per cent and the Paris CAC 40 advanced 3.27 per cent.
On the corporate front, Talisman Energy Inc. lowered its full-year production forecast to about 425,000 barrels of oil per day, down from a previous estimate of 430,000 to 440,000 barrels, as it resumes production at its Rev facility in Norway. Its shares fell 15 cents to $12.
Precision Drilling Corporation has signed deals to build eight new rigs for the Canadian and U.S. oil and gas industry. Financial terms of the contracts were not revealed by the big Calgary-based drilling services company. Its shares lost 12 cents to $8.95.
Labopharm Inc. and Gruppo Angelini have terminated their existing joint venture agreement established in May 2010 and restructured their drug-commercialization partnership and its shares dipped half a cent to 28 cents.
Costco Wholesale Corp.’s fiscal fourth-quarter net income climbed 11 per cent to US$478 million as the wholesale club operator made more money on membership fees and saw sales rise. But the performance missed analysts’ expectations. The company also said it will raise annual membership fees starting next month.
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