July 4, 2012 / 1:59 PM / 5 years ago

TSX hits 2-month high on ECB hopes, TMX shares jump

An electronic board displays the midday TSX index in Toronto February 16, 2011. REUTERS/Mark Blinch

TORONTO (Reuters) - Canada’s main stock index hit a two-month high on Wednesday, led by financial shares, which gained on hopes major central banks will provide more monetary stimulus to help counter the drag from the euro zone crisis.

The rise followed the Toronto Stock Exchange S&P/TSX composite index’s .GSPTSE biggest single-day gain this year on Tuesday, when hopes for easing by central banks outside of Canada also drove the rally.

Nearly all of the Canadian market’s 10 main sectors were higher. The financial group led gains, rising 0.7 percent as investors anticipated the European Central Bank will cut rates and may also inject fresh funds to help boost the region’s struggling economy.

“We’ve seen better strength in the price of bank stocks and that’s a key indicator on Europe,” said Arthur Salzer, chief executive of Northland Wealth Management. “You’re starting to see that liquidity come back to the market and the risk trade come on.”

Canada’s major lenders were the main benefactors of the central bank hopes, with Royal Bank of Canada (RY.TO) climbing 1.2 percent to C$53.72, Bank of Nova Scotia (BNS.TO) rising 1 percent to C$53.84, and Bank of Montreal (BMO.TO) up 0.7 percent at C$57.77.

But Wednesday’s volumes were light with U.S. markets closed for the Independence Day holiday and investors cautious ahead of policy decisions from the ECB and the Bank of England on Thursday.

Weak euro zone data on Wednesday added to expectations of a rate cut. Activity in Germany’s services sector unexpectedly stagnated in June, while business expectations in France slumped to the lowest level in three years.

The TSX finished up 65.12 points, or 0.55 percent, at 11,913.87. The index at one point hit 11,936.16, its highest level since May 4.

The TSX rose for the sixth straight session, its longest such streak in about a year.

The heavily-weighted energy and materials groups also gained, climbing 0.6 percent and 0.3 percent respectively. The most influential gainers included Suncor Energy (SU.TO), up 1.4 percent to C$31.13, Talisman Energy TLM.TO, which rose 2 percent to C$12.21, Potash Corp (POT.TO), up 0.7 percent to C$46.09, and Goldcorp Inc (G.TO), up 1.1 percent to C$40.34.

Eldorado Gold (ELD.TO) shares slid nearly 7 percent to C$12.35 after Greece’s top administrative court ordered the Canadian gold miner to stop cutting trees on its mining and exploration properties in Northern Greece.

TMX RISES, TRICAN SHARES DRAG

Shares of TMX Group (X.TO) rose more than 3 percent to hit four-year high of C$48.50 after Ontario’s securities regulator and Canada’s Competition Bureau approved the C$3.8 billion ($3.75 billion) takeover of Canada’s biggest stock exchange operator.

The approvals of the bid made by a group of domestic financial institutions brought what has been a protracted process close to final approval.

On the downside, shares of Trican Well Service (TCW.TO) plunged more than 7 percent to C$11.35 after the company, which performs hydraulic fracturing on oil and gas wells, warned that wet spring weather and falling capital spending by its customers would push it to a second-quarter loss.

Shares of fracking rival Calfrac Well Services Ltd (CFW.TO) also fell, dropping 5.1 percent to C$23.

“The service companies have been miserable investments for the last five or six months,” said John Stephenson, senior vice president at First Asset Investment Management Inc. “The reality is we’re very challenged in the gas environment in North America, but particularly in Canada.”

Magna International Inc (MG.TO) shares jumped 6 percent to C$42.43 as Canada’s biggest auto parts supplier was boosted by data showing stronger-than-expected U.S. June sales for most major automakers.

“People still do have to turn in their cars every few years,” said Salzer, adding most consumers are holding onto their autos longer than they were doing pre-recession. “Any type of initial boost, faster than what it was for the last couple of years, will definitely give that spike.”

($1=$1.01 Canadian)

Editing by Jeffrey Hodgson

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