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TORONTO (Reuters) - Canada's main stock index closed at a five-month high on Thursday as mining and energy companies jumped after the Federal Reserve said it would buy more bonds until the jobs outlook rebounds for Canada's biggest trading partner.
The Fed said it will buy $40 billion of mortgage-related debt per month as long as inflation remains contained, and indicated interest rates would not be raised from current rock-bottom lows until at least mid-2015.
"It's more than what the market expected," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier. "The commodities should do very well, we've already seen a lift in gold."
The price of bullion surged 2 percent after the Fed news, lifting Canada's gold miners with it, while energy stocks also advanced as crude moved higher for a sixth session. <GOL/> <O/R>
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 127.54 points, or 1.04 percent, at 12,360.16, its highest finish since April 2.
Goldcorp Inc (G.TO) jumped 4.7 percent to C$44 and Barrick Gold Corp (ABX.TO), the world's biggest gold miner, added 4.1 percent to C$40.32. Diversified miner Teck Resources Ltd TCKb.TO moved 2.8 percent higher to C$31.44 and Suncor Energy (SU.TO) was up 1.1 percent at C$33.18.
"Commodities are responding as they typically do when you see further inflation in the economy," said Youssef Zohny, portfolio manager at Stenner Investment Partners, part of Richardson GMP in Vancouver.
Previous stimulus programs encouraged investors to push money into riskier asset classes, including commodities and equities, lifting prices.
"We could actually see - which would be a change from what we've seen year to date - the TSX perhaps lead the S&P 500 and outperform it over the near term on rising commodity prices," said Philip Petursson, director of the portfolio advisory group at Manulife Asset Management.
The broad U.S. index .SPX is up more than 14 percent so far this year, while the TSX has advanced just 2.3 percent.
Among individual companies, Transat A.T. Inc TRZb.TO shares jumped almost 20 percent to C$4.90 after the travel operator swung to a profit as cost-cutting bore fruit, and said it expects margins to continue to improve.
Shares of medical isotope provider Nordion Inc NDN.TO pared some recent losses, gaining 3.2 percent to $C7.09 on news it will reorganize its business into two distinct units and appoint a private equity executive to its board.
The stock had slumped earlier this week as Nordion suspended its dividend after an arbitration panel rejected its claim for damages from its main supplier.
Macdonald, Dettwiler and Associates (MDA.TO) shares fell 5.9 percent to C$50.65 after the surveillance and satellite company said the U.S. Department of Justice was seeking more information about its planned acquisition of Space Systems/Loral Inc.
Additional reporting by Solarina Ho; Editing by James Dalgleish