TSX rallies on oil; Bernanke cools stimulus hopes
By Jon Cook
TORONTO (Reuters) - Canada's main stock index hit a one-week high on Tuesday, rising with energy shares on fresh tensions in the Middle East, but gains were limited after Federal Reserve Chairman Ben Bernanke dampened expectations of further monetary stimulus.
Financial markets had hoped for signs the Fed was moving closer to a third round of bond purchases, also known as quantitative easing, or QE3. Bernanke repeated the Fed's pledge to act if needed, even while offering no new clues on when or how the central bank might offer extra support to the U.S. economy.
Still, the market remained hopeful of future Fed action.
"I would not be surprised to see further stimulus and easing in the next couple months out of the U.S. and that's what the market is telling us today," said Barry Schwartz, vice president and portfolio manager at Baskin Financial Services.
"If there's stimulus and easing, you want to own commodities."
Canada's resource-heavy index fell after Bernanke's comments in his semiannual testimony to Congress, but rebounded as U.S. crude bounced back amid rising tensions involving the West's dispute with Iran over Tehran's nuclear program. <O/R>
"(U.S.) oil at $85 to $95 (a barrel) is Goldilocks - it's too good to be true," said Schwartz. "It's a nice price for the economy where you don't have worries about gasoline prices getting too high or inflation, and it's a good price for the oil producers to make a lot of money."
Canada's influential oil and gas patch led the broader index's gains, climbing 1.3 percent. Canadian Natural Resources (CNQ.TO: Quote) jumped 3.2 percent at C$27.31, Encana Corp (ECA.TO: Quote) also rose 3 percent to C$20.63, and Suncor Energy (SU.TO: Quote) was up 0.9 at C$29.99. Continued...