TORONTO (Reuters) - Canada's main stock index gained more than 1 percent on Friday in a broad, resource-led rally backed by higher commodity prices a day after the U.S. Federal Reserve announced major stimulus measures.
The TSX extended Thursday's 1 percent rally, with traders inspired by the Fed's promise to pump $40 billion into the U.S. economy every month, as long as inflation remains contained, until the country's weak labor market turns around.
Resource stocks were buoyed as investors returned to riskier assets. Stronger commodity prices translated to a 2 percent gain in energy stocks and a 2.6 percent rise in materials shares.
"I'd like to hope this lasts for a while and provides some measure of optimism for investors going forward, but it's going to take a while for it to work through the system," said Rick Hutcheon, president and chief operating officer at RKH Investments, referring to both the Fed news and a similar move from the European Central Bank earlier this month.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE climbed 139.31 points, or 1.13 percent, to close at 12,499.47 on Friday. Seven of the 10 main sectors were higher.
Earlier in the session, the index rose as high as 12,529.77, the highest point since March 27, when it touched 12,603.71.
The index notched a 1.9 percent gain for the week and has moved more than 4 percent higher since early September, when first the ECB and then the Fed lined up to announce big bond-buying plans to support stumbling economies.
"Whether or not that is enough in the short term to maintain the enthusiasm or euphoria, personally I doubt it, but the general direction has been established here," Hutcheon said.
Suncor Energy (SU.TO) was the most influential gainer on the index, rising 3.4 percent to C$34.32. Oil and gas producer Canadian Natural Resources (CNQ.TO) was up 2.6 percent at C$33.67, while miner Teck Resources TCKb.TO rose 5 percent to C$33.02.
U.S. crude prices finished the week up 2.7 percent on hopes of stronger global demand for oil following the Fed's aggressive move and as Middle East tensions escalated.<O/R>
Copper prices jumped to 4-1/2-month highs as investors hoped the stimulus measures would boost demand for industrial metals, while gold prices touched a six-month high. <MET/L> <GOL/>
"The markets responded well yesterday and they're still responding well today," said Pat McHugh, Canadian equity strategist at Manulife Asset Management.
Financial stocks, which make up nearly a third of the index's weight, were up 1 percent, led by Manulife Financial (MFC.TO), which was 4.1 percent higher at C$12.64.
Telecom, healthcare, consumer staple stocks ended in negative territory.
"The traditionally defensive sectors, those were the ones that had been doing well prior to the announcement ... people are basically selling, taking profits in the few sectors that have made money," McHugh said.
"People have been feeling that there has been a sea change. Whether that is in fact true remains to be seen ... from this point forward, for the market to go up we're going to need something on the earning side."
Additional reporting by Alastair Sharp; Editing by Dan Grebler; and Peter Galloway