CANADA STOCKS-Banks help keep TSX above 12,000

Fri Aug 17, 2012 4:43pm EDT
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* TSX up 57.31 points, or 0.48 percent, at 12,089.89
    * Diminishing fear of Europe helps risk appetite
    * Banks lead rise ahead of end-August earnings period

    By Alastair Sharp
    TORONTO, Aug 17 (Reuters) - Canada's main stock index closed
higher o n Friday, capping a second straight week of gains a s
banks and energy stocks pushed higher and political backing for
European central bank action lent support.
    The rally suggested that steps toward a resolution of
Europe's debt crisis were leading to renewed risk appetite that
could favor Canada, with its abundance of resource-related
    "If you remove the perception of event risk in Europe, money
will come back in," said Michael Gayed, the ch ief i n vestment
st r ategist at Pension Partners L LC in New York.
    It was banks -- which are duet to report quarterly earnings
in late August -- that had the biggest positive influence o n the
Canadian index, with Royal Bank of Canada rising 1.0
percent to C$53.99 and Toronto Dominion Bank up 0.9
percent to C$81.24. 
    German Chancellor Angela Merkel voiced support for ECB
President Mario Draghi's crisis-fighting strategy on Thursday
an d urged her European partners to move swiftly towards a closer
integration of fiscal policies, saying time was running short.
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    "You have this strange global cognitive dissonance
happening, where everyone has been talking about the end of the
world because of Europe, but prices aren't reflecting that,"
Gayed said.
    The Toronto Stock Exchange's S&P/TSX composite index
 unofficially closed up 5 7.31 points, or 0.48 percent,
at 12,089.89. I t marked the second straight week in which the
index added more than 1.6 percent.
    Still, other investors questioned how much higher the
Canadian index could go as it tests levels above 12,000 points
last seen in early May.
    "The index is getting close to being what I would consider
overbought," said Julie Brough, vice president at Morgan Meighen
& Associates. "I question whether this is the beginning of a
prolonged upward trend or more of a relief rally."
    Oil and gas companies also added to the gains, with Suncor
Energy Inc leading the way with a 1 . 2 percent rise to
C$32.43 .
    Canadian inflation came in tamer than forecast in July,
raising expectations that the Bank of Canada will keep interest
rates at near-record lows well into next year. 
    Meanwhile, a gauge of future U.S. economic activity improved
in July, while U.S. consumer sentiment improved in early August.
    An improving U.S. economic outlook has positive implications
for Canadian equities, given the major trade conducted between
the two countries.
    Canadian National Railway Co also helped push the
index higher, adding 1.5 percent to C$91.54.