CORRECTED-Gold gains help TSX shrug off U.S., Europe worries
* TSX up 56.95 pts, or 0.5 pct, to 11,383.03 * Gold miners lead gains; financials fall * Weak U.S. data boosts hopes of further Fed stimulus * Greek, Spain bank woes weigh on market By Jon Cook TORONTO, May 17 (Reuters) - Toronto's main stock index rebounded on Thursday a day after hitting a 2012 low, as gains from gold miners offset soft U.S. economic data and mounting worries about turmoil in Greece and Europe's fragile banking sector. Canada's sub-index of gold mining firms jumped 6 percent as gold prices firmed after sinking to a 4-1/2-month low on Wednesday, lifting the broader index into positive territory. Top gold producers Barrick Gold and Goldcorp led the group's gains. Barrick was up more than 6 percent at C$37.91 and Goldcorp rose nearly 8 percent to C$35.75. Smaller miners were also up, with Eldorado Gold rising 7.6 percent to C$11.20 and Yamana Gold climbed 6.5 percent to C$14.05. Gold was also boosted by Wednesday's release of the U.S. Federal Reserve's minutes from its most recent meeting in which policymakers kept alive the possibility of a fresh round of monetary stimulus for the moderately expanding U.S. economy. "Gold has benefited from pressure on the Fed to engage in QE 3," said Fergal Smith, managing market strategist at Action Economics. Weak U.S. data on Thursday supported the case for further monetary easing. The Philadelphia Federal Reserve Bank said its index gauging factory activity in the U.S. Mid-Atlantic region unexpectedly dropped to a reading of minus 5.8 in May, indicating contraction and the lowest level since last September. Meanwhile, new U.S. jobless claims were flat at 370,000, slightly disappointing market expectations. "The slump in the Philly Fed is consistent with the view that the U.S. economic backdrop is also weakening," said Smith. At 11:22 a.m. (1522 GMT), the Toronto Stock Exchange's S&P/TSX composite index was up 56.95 points, or 0.5 percent, to 11,383.03. On Wednesday the index hit a seven-month low at 11,298.46. Smith saw Thursday's boost being short-lived and expected the TSX would eventually test last year's low of 10,848.19, reached on Oct. 4, before staging a larger rally. "The market will see increased support as that trough comes into view." Thursday's gains were muted by jitters over political turmoil in Athens, where politicians rejecting harsh austerity measures are likely to win June 17 elections. Wednesday's move by the European Central Bank to stop providing liquidity to some Greek banks, which are severely under-capitalized, added to the pressure. "What's dominating the markets is fear of an uncontrolled Greek exit from the euro," said Smith. "Compounding matters is Spanish bank stress." Spain's borrowing costs shot up at a bond auction on Thursday after economic data confirmed the country is back in recession and reports that nationalized Bankia had suffered an outflow of deposits hammered its share price. Canadian financial issues, which could be vulnerable if Greece were to suffer a disorderly default, were down nearly 1 percent. Royal Bank of Canada shed 1.4 percent to C$52.28 and Toronto-Dominion Bank fell 1 percent to C$78.11. In other news, shares of Canadian Pacific Railway Ltd rose 1.2 percent to C$76.70 after Chief Executive Fred Green resigned following a bitter proxy battle with New York activist shareholder William Ackman on Thursday, clearing the way for a management overhaul at the country's second-biggest railroad.
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