TSX gains as banks, insurers seen gaining from Fed

Thu Mar 20, 2014 5:00pm EDT
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By Alastair Sharp

TORONTO (Reuters) - Canada's main stock index gained ground on Thursday with financial stocks leading the way as investors bet on higher U.S. interest rates and economic recovery helping insurers and domestic lenders.

Financial companies took four of the top five spots on the list of positive index movers, a day after the U.S. Federal Reserve raised the specter of an earlier-than-expected increase in interest rates in Canada's largest trade partner.

"If (U.S.) interest rates go up a little faster than anticipated that is generally good news for bank interest margins," said Elvis Picardo, strategist at Global Securities.

"For insurers especially, higher bond yields makes a big positive difference to their portfolios, and so does the recovery in equity markets," he added.

Insurer Manulife Financial Corp (MFC.TO: Quote) jumped 2.6 percent to C$21.61 and peer Sun Life Financial Inc (SLF.TO: Quote) added 1.7 percent to C$38.91.

Royal Bank of Canada (RY.TO: Quote), the country's biggest lender, added 0.5 percent to C$72.19 and Toronto-Dominion Bank (TD.TO: Quote) rose 0.4 percent to C$51.80.

On Tuesday, Bank of Canada Governor Stephen Poloz warned about a prolonged period of sluggish growth and low interest rates.

"If you look at a bank like TD, I believe it has more branches in the U.S. now than it has in Canada," Picardo said. "The Canadian banks have been making inroads into the U.S. in the last 5 years."   Continued...

A sign shows TSX information in Toronto September 15, 2008. REUTERS/Mark Blinch