February 28, 2011 / 2:18 PM / 6 years ago

TSX closes at highest level since July 2008

3 Min Read

TORONTO (Reuters) - Toronto's main stock index rallied to its highest close since July 2008 on Monday, spurred by better-than-expected economic growth last quarter and a C$4.8 billion ($4.9 billion) takeover bid for Lundin Mining.

Statistics Canada said surging exports helped kick-start the economy in the quarter after a bout of sluggish growth. The data supported market expectations that the Bank of Canada will resume hiking interest rates before mid-year.

"The Canadian GDP numbers for the fourth quarter were a lot stronger than people had anticipated," said Irwin Michael, portfolio manager at ABC Funds in Toronto. "I think it's quite good for Canada in that unemployment will start firming up meaningfully here."

The index's mining-heavy materials group rose 0.93 percent, with Lundin surging 18.6 percent to C$7.65 after Australia's Equinox Minerals made an offer to buy the base-metals miner. The move could trigger a bidding war with Inmet Mining, which has a merger agreement with Lundin.

Equinox shares ended down 8.61 percent at C$5.73. Inmet Mining was off 0.73 percent at C$66.81.

Also in the materials sector, copper-producer First Quantum Minerals rose 8.68 percent to C$126.50.

The Toronto Stock Exchange's S&P/TSX composite index ended up 84.37 points, or 0.6 percent, at 14,136.50. Eight of the index's 10 main sectors were in positive territory.

The index weakened late in the session before being buoyed by a spate of last-minute buying.

"The market is saw-toothing its way up," Michael said. "We wouldn't be surprised if the market is perhaps a little bit overbought in the short run, but there's a lot of money out there and investors tend to like buying on the dips, and this is what's going on, so on balance we remain optimistic."

Fertilizer producer Potash Corp rose for a fourth consecutive day, up 1.68 percent at C$59.86, with Gleacher & Co the latest firm to raise its rating on the fertilizer giant.

The energy group, which makes up about a quarter of the index, was up 1.11 percent. Baytex Energy rose 1.36 percent to C$55.85, while Nexen was up 2.71 percent at C$26.51.

Market sentiment had been gloomy as violent unrest in North Africa sparked worries that the protests would spread to other parts of the region and that surging oil prices could crimp global economic recovery. Reassurances from Saudi Arabia late last week soothed some of the supply worries and reined in crude prices.

Shares of SNC-Lavalin ended down 1.47 percent at C$56.24 on the strife in the Middle East and Africa, where the engineering and construction company generates a quarter of its revenue.

Separately, the Ontario Municipal Employees Retirement System said on Monday it is working with SNC on a bid to buy the commercial reactor business of Canada's nuclear agency.

($1=$0.97 Canadian)

Additional reporting by Solarina Ho; editing by Peter Galloway

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