TSX rallies to three-week high on euro zone hopes
By Jon Cook
TORONTO (Reuters) - Canadian stocks hit a three-week high on Friday, led by financial and energy shares, as risk trade rallied on renewed optimism that European policymakers were united in battling the euro zone's debt crisis that is sapping global economic growth.
German Chancellor Angela Merkel and French President François Hollande said on Friday that they are "deeply committed to the integrity of the euro zone" and "are determined to do everything to protect the euro zone." The joint statement echoed similar remarks by European Central Bank President Mario Draghi on Thursday.
Equities extended gains after Bloomberg News said Draghi will meet with Bundesbank President Jens Weidmann to discuss several measures, including bond purchases, to help the euro zone.
"Today they came out with a fairly unified statement about the kinds of things they'd like to do, including bond buying and interest rate cuts," said Rick Meslin, head of Canadian equities at UBS Securities Canada.
Meslin added the comments likely encouraged some of the larger investment funds to get off the sidelines, providing "a lot of ammunition to buy stocks."
The ECB, which cut interest rates to a record low in early July, will meet again next Thursday to decide on interest rates and discuss policy measures. It has previously bought government bonds in the secondary market to push yields lower, and pressure is building on it to do more.
"If that's the case it will be removing the really bad outcome of a financial collapse," said Carlos Leitao, chief economist at Laurentian Bank Securities.
The news lifted Canada's financial services sector, which rose 1.5 percent to lead the broader index higher. Gains were led by the country's top lenders, with Royal Bank of Canada (RY.TO: Quote) up 1.7 percent at C$51.73, Toronto-Dominion Bank TD.TO up 1.4 percent at C$79.48, and Bank of Nova Scotia BNS.TO rising 1.4 percent to C$52.02. Continued...