CANADA STOCKS-TSX rallies to 3-week high on euro zone hopes
* TSX ends up 126.61 pts, or 1.1 pct, at 11,766.36 * Index at highest level since July 5; up 1.2 pct on week * Financial, resource shares lead gains * Hopes of ECB, Fed stimulus moves boost markets * Progress Energy Resources up 13 pct on takeover bid By Jon Cook TORONTO, July 27 (Reuters) - Canadian stocks hit a three-week high on Friday, led by financial and energy shares, as risk trade rallied on renewed optimism that European policymakers were united in battling the euro zone's debt crisis that is sapping global economic growth. German Chancellor Angela Merkel and French President François Hollande said on Friday that they are "deeply committed to the integrity of the euro zone" and "are determined to do everything to protect the euro zone." The joint statement echoed similar remarks by European Central Bank President Mario Draghi on Thursday. Equities extended gains after Bloomberg News said Draghi will meet with Bundesbank President Jens Weidmann to discuss several measures, including bond purchases, to help the euro zone. "Today they came out with a fairly unified statement about the kinds of things they'd like to do, including bond buying and interest rate cuts," said Rick Meslin, head of Canadian equities at UBS Securities Canada. Meslin added the comments likely encouraged some of the larger investment funds to get off the sidelines, providing "a lot of ammunition to buy stocks." The ECB, which cut interest rates to a record low in early July, will meet again next Thursday to decide on interest rates and discuss policy measures. It has previously bought government bonds in the secondary market to push yields lower, and pressure is building on it to do more. "If that's the case it will be removing the really bad outcome of a financial collapse," said Carlos Leitao, chief economist at Laurentian Bank Securities. The news lifted Canada's financial services sector, which rose 1.5 percent to lead the broader index higher. Gains were led by the country's top lenders, with Royal Bank of Canada up 1.7 percent at C$51.73, Toronto-Dominion Bank up 1.4 percent at C$79.48, and Bank of Nova Scotia rising 1.4 percent to C$52.02. The heavyweight oil and gas group climbed 1.8 percent as U.S. crude rose for a fourth day on hopes for more stimulus from the U.S. Federal Reserve after data showed U.S. economic growth slowed in the second quarter as expected. Progress Energy Resources Corp led energy gains, soaring nearly 14 percent to C$22.85 after the Canadian natural gas producer said Malaysia's state-owned oil company Petronas has agreed to raise its offer to buy the company by 8 percent. The deal is the latest by state-owned Asian companies for companies in the Canadian energy patch. Earlier this week, Chinese state-owned oil company CNOOC Ltd's offered $15.1 billion for Canadian oil producer Nexen Inc in what would be China's largest foreign deal. Also supporting the sector's rise was Talisman Energy , which jumped 5.7 percent to C$12.71, and Encana Corp , up 4.7 percent at C$21.30. Paring gains was Cameco Corp, which tumbled 2.5 percent to 22.08 after the uranium producer reported an 85 percent drop in quarterly profit on Friday on lower sales volume, higher costs and a one-time charge for a canceled sales contract. The Toronto Stock Exchange's S&P/TSX composite index closed up 126.61 points, or 1.1 percent, at 11,766.36. The index at one point touched 11,802.51 -- its highest level since July 5. It also ended up 1.2 percent for the week. The influential materials sector, which includes miners, rose 0.8 percent as gold and copper extended their near week-long rally. The most influential gainers included Eldorado Gold Corp , which rose 5.5 percent to C$11.10, and copper miner Teck Resources, up 2.8 percent to C$28.66. Markets largely shrugged off U.S. data on Friday that showed America's economic growth slowed in the second quarter as consumers spent at their most sluggish pace in a year. While the figure was better than investors' worse fears it was still weak enough to potentially push the Fed closer to pumping more money into the economy. "The economy would have to be much weaker than this for the Fed to really step in big time," said Leitao, adding a smaller move such as extending the central bank's current ultra-low overnight interest rate to 2015 was more likely. "That I think they can do and probably will do."
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