January 5, 2012 / 2:33 PM / 6 years ago

TSX extends rally on materials strength

TORONTO (Reuters) - Toronto's main stock index rose for a fifth-straight session on Thursday driven by materials issues, which climbed on higher bullion prices and unexpectedly strong U.S. jobs data that offset fears over Europe's banking sector.

A surge in U.S. private sector hiring helped reverse the market's early retreat as the ADP National Employment Report for December showed U.S. employers added 325,000 new workers, nearly double economists' predictions.

The heavily weighted materials sector helped pull up the broader TSX index, rising 0.8 percent, as the strengthening U.S. economic outlook increased optimism about increased demand for commodities.

Potash Corp (POT.TO) led the sector's gains, rising 1.2 percent to C$43.96. First Quantum Minerals (FM.TO) was up 4.4 percent to C$21.98, as copper prices pared losses with a late-day surge.

Barrick Gold (ABX.TO), up 0.3 percent at C$48.86, also contributed to the index's rise as bullion recouped last week's losses, which briefly sent the precious metal into bear market territory.

"The U.S. economy is gaining some traction and some of these things that we've been worrying about for the last six months are starting to recede into the background," said Rick Hutcheon, president and chief operating officer at RKH Investments.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 10.93 points, or 0.09 percent, at 12,237.40, its highest level in a month.

The string of five consecutive gaining sessions is the TSX's longest in six months, since a six-session streak from June 27 to July 5, 2011.

On Thursday morning, investor concerns focused on large Italian bank UniCredit (CRDI.MI) which saw its shares plunge for a second straight day after it offered a 7.5 billion euro ($9.68 billion) rights issue on Wednesday at a massive discount.

Additionally, new data from the European Central Bank suggested banks were hoarding cash rather than lending to each other, despite the ECB providing almost half a trillion euros of ultra-cheap three-year loans last month.

"The market knows that, ultimately, the improved round of U.S. data over the last few months won't have legs if the European crisis accelerates," said Fergal Smith, managing market strategist at Action Economics.

Canadian financials, which started the week's rally, fell back on Thursday, dropping 0.3 percent on resurgent concerns about euro zone nations' ability to tap into debt markets in upcoming bond auctions.

Royal Bank of Canada, (RY.TO) led the sector's decliners, down 1.2 percent to C$52.34.

The TSX has ended in positive territory for nine of the last 10 sessions and Canadian stocks are enjoying their best run in six months as improving U.S. economic data increasingly has investors hopeful the North American recovery will endure.

"I think the focus of North American managers is increasingly being drawn back to the domestic markets," said Hutcheon. "To that degree, people are beginning to tiptoe and accumulate positions in some of these stocks that represent some pretty good value here."

($1=$1.02 Canadian)

Reporting By Jon Cook; editing by Rob Wilson

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