Fed talk lifts sentiment, TSX hits 3-week high

Wed Jul 10, 2013 5:31pm EDT
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By John Tilak

TORONTO (Reuters) - Canada's main stock index advanced on Wednesday to its highest in three weeks as investor sentiment improved after U.S. Federal Reserve meeting minutes suggesting a balanced stimulus pullback, offsetting weak trade data out of China.

The Toronto market extended its gains to a third straight session as it received help from shares of energy producers and retailer Alimentation Couche-Tard (ATDb.TO: Quote).

Investors closely watched as China, a big consumer of Canada's commodity exports, warned of a "grim" outlook for trade after a surprise fall in June exports, raising fresh concerns about the extent of the slowdown in the world's second-largest economy.

But the market's big focus was on monetary policy as consensus built within the Federal Reserve in June about the likely need to begin pulling back on economic stimulus measures soon, while many officials wanted more reassurance the employment recovery was on solid ground before a policy retreat.

"The Fed is very methodically correcting some of the overreaction that we're seeing," said Karl Schamotta, senior market strategist at Western Union Business Solutions.

"I don't think they want to rock the boat intentionally," he added. "(But) ... they want to put a ceiling on the froth in the market because that froth is unsustainable."

Schamotta expects the Fed to support the economy without undoing the reforms the central bank has been putting into play.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 9.84 points, or 0.08 percent, at 12,306.93.   Continued...

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch