TSX ends volatile year with a rally

Fri Dec 30, 2011 6:36pm EST
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By Jon Cook

TORONTO (Reuters) - Toronto's main stock index closed higher on Friday, the last trading day of the year, as financial and resource shares rallied on signs the U.S. economy was recovering, but the jump was not enough to avert the index's first year-on-year decline since 2008.

The resources-heavy index ended more than 11 percent down on the year and 17 percent off the peak of 14,329.49 it hit in March, hurt by the euro zone debt crisis and a slowdown in top metals consumer China.

Base metal miners were the worst-hit shares, falling 27 percent in 2011 as copper prices tumbled more than 20 percent to record their first year-on-year decline in three years.

"I think people got too exuberant about commodity stocks," said Barry Schwartz, vice president and portfolio manager at Baskin Financial Services. "When copper was well over $4 a pound, oil at $100 a barrel, you have to take a big leap of faith in thinking they're going to go much higher."

On Friday, metals miners reversed their downward trend, gaining more than 1 percent as copper rallied as signs of growth in the U.S. economy offset worries about the euro zone and encouraged investors to increase bets on riskier assets.

Copper's year-end gain was good news for miner First Quantum Minerals FM.TO, which climbed 3.7 percent to C$20.05.

Friday's rally in metals defied Chinese manufacturing data that showed the country's factory sector shrank again in December as demand at home and abroad slackened, a purchasing managers' survey showed on Friday.

"I think people realize that China is going to slow because their largest market is the European Union and everybody is well aware of what's going on in that mess," said John Kinsey, portfolio manager at Caldwell Securities Ltd.   Continued...