Fed-fueled rally takes TSX to two-week high

Thu Dec 19, 2013 4:39pm EST
 
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By John Tilak

TORONTO (Reuters) - Canada's main stock index reached its highest level in two weeks on Thursday after a decision by the U.S. Federal Reserve to trim its monetary stimulus program helped drive gains in the financial and energy sectors.

The Toronto market basked in the afterglow of the Fed announcement, which came in on Wednesday, recording a weekly gain of 2 percent, it strongest performance in more than five months.

However, a sharp drop in bullion dragged the commodity price to a six-month low and triggered a decline in gold-mining shares.

Investors bracing for a selloff after the Fed statement on Wednesday were pleasantly surprised by the market reaction. Global equity markets rallied after the news, and Toronto stocks recorded a 1.2 percent jump in Wednesday's session.

"The uncertainty that was hounding the market for the last several months was removed," said Shailesh Kshatriya, associate director for client investment strategies at Russell Investments Canada.

"The Fed was very careful in the way it massaged the language, that tapering will be gradual and tightening is still a long time away," he added.

Investors were encouraged by the fact that increasing strength in the world's biggest economy and greater confidence in the recovery led to the Fed decision.

The U.S. central bank cut the pace of its monthly asset purchases and suggested its key interest rate would stay low longer than previously promised.   Continued...

 
An electronic board displays the midday TSX index in Toronto February 16, 2011. REUTERS/Mark Blinch