CANADA STOCKS-TSX ends higher but retreats from China rally

Mon Jun 21, 2010 5:04pm EDT
 
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 *TSX up 8.49 points, or 0.07 percent, at 11,936.08
 *Energy, base-metals, financial groups higher
 *RIM shares drop 2.9 percent on Goldman rating
 *Biovail rises 14.5 pct on news on Valeant deal
 (Adds details on financial stocks, Harper comments)
 By Claire Sibonney
 TORONTO, June 21 (Reuters) - Toronto's main stock index
closed slightly higher on Monday, but beat a profit-taking
retreat from a sharp rally earlier in the day that was spurred
by China's vow to allow its currency to trade flexibly.
 Before giving back most of their gains by the end of the
day, shares of base-metal miners shot up more than 3 percent as
copper prices rose on hopes that China's move would increase
its demand for industrial metals. China is already the world's
largest consumer of industrial metals . [MET/L]
 Teck Resources (TCKb.TO: Quote) jumped 3.6 percent to C$36.67,
while First Quantum Minerals (FM.TO: Quote) soared 4.4 percent to
C$64.59.
 "The big news of the day today was China ... I think that
makes investors a little more comfortable," said Aaron Fennell,
senior markets strategist at futures brokerage Lind-Waldock.
 "It will loosen up some of the imbalances that are present
in the global economy, particularly between the United States
and China ... countries like Canada and some European countries
also have trade deficits with China."
 Gold-mining stocks, however, fell 3 percent, as the price
of precious metal eased from record highs as safe-haven demand
eased. [GOL/]
 Barrick Gold Corp (ABX.TO: Quote) lost 2.5 percent to C$45.86,
while Goldcorp Inc (G.TO: Quote) also dropped 2.5 percent to C$45.35.
 Crude oil prices pared gains after bouncing to a 6-1/2-week
high, and natural gas prices slid, but energy shares settled
0.2 percent higher. [O/R]
 Suncor Energy (SU.TO: Quote) was up 0.3 percent at C$34.54, while
EnCana Corp (ECA.TO: Quote) was flat at C$35.24.
 "I think a lot of China moving to a more flexible currency
was pretty much priced in so you're seeing a lot of
profit-taking on the big pop today," said Youssef Zohny,
associate portfolio manager at Van Arbor Asset Management in
Vancouver.
 China's weekend announcement that it will allow its
currency, the yuan, to rise was seen as a signal of confidence
in its economy, while fending off criticism that the yuan is
undervalued, giving its exports an unfair advantage in trade.
 Commodity prices had pushed higher as the move was expected
to increase the purchasing power of Chinese importers and
create higher demand in the global economy, which encouraged
investors globally to buy risky assets.
 But as the day progressed, investors expressed some
uncertainty about what direction China's currency will take.
 "The flexibility works both ways. It could revalue on the
upside but it could also revalue on the downside," Zohny said.
 "And it looks like it's more of a political move than an
actual move, and time will really tell on that one."
 Canadian Prime Minister Stephen Harper told Reuters that
China did well to loosen controls on its currency but it is too
soon to say how much the move will contribute to a sustainable
global recovery. [ID:nN21249551]
 The Toronto Stock Exchange's S&P/TSX composite index
.GSPTSE closed 8.49 points, or 0.07 percent, higher at
11,936.08. Eight of the TSX's 10 main groups were higher.
 Earlier in the session, the TSX touched its highest level
since May 14.
 Financial stocks were up 0.7 percent as Bank of Montreal
BMO.TO gained almost 1 percent to C$63.07, and Bank of Nova
Scotia added 0.8 percent to C$51.55.
 "Canadian financials I think are going to be highlighted
this coming weekend. I think that was the main reason Harper
wanted to have the G20 in Toronto," said Fennell, referring to
the country's banking system emerging relatively unscathed from
the global credit crisis.
 Also supporting domestic banks, Zohny pointed out, was the
market expectation that the U.S. Federal Open Market Committee
on Wednesday would signal prolonged low interest rates.
 "You're not going to see super-aggressive interest rate
moves from the Bank of Canada unless the U.S. moves as well,"
he said.
 In individual company news, shares of Biovail Corp BVF.TO
BVF.N rallied 14.5 percent to C$17.02 after Canada's biggest
publicly traded drugmaker said it will buy U.S.-based Valeant
Pharmaceuticals International (VRX.N: Quote) in a deal worth roughly
$3 billion. [ID:nSGE65K07S].
 Shares of Research In Motion RIM.TO fell 2.9 percent to
C$60.31 after Goldman Sachs reiterated its "sell" rating on the
company, citing an increased risk of the BlackBerry maker
posting weaker-than-expected quarterly results later this
week.
 HudBay Minerals (HBM.TO: Quote) climbed 7.9 percent to C$12.65
after the base metal miner named David Garofalo as its
president and chief executive. [ID:nN21227027]
 ($1=$1.02 Canadian)
 (Editing by Peter Galloway)