June 18, 2012 / 12:58 PM / 5 years ago

TSX rallies on gold miners, Europe weighs

People walk by a Bay Street sign inside the financial district in Toronto October 10, 2008. REUTERS/Mark Blinch

TORONTO (Reuters) - Canadian stocks rose on Monday, climbing with gold mining and defensive shares as investors remained nervous about the euro zone’s lingering debt crisis, despite a weekend victory for pro-bailout parties in Greece.

Financial markets’ relief at the Greek vote was offset by worries over its unresolved problems, the lack of a clear plan for the euro zone as a whole, and uncertainty ahead of meetings of the Federal Reserve and Group of 20 this week.

“A lot of bad news has been priced into equities over the last little while,” said Philip Petursson, director of the portfolio advisory group at Manulife Asset Management. “There is much less downside and that is keeping the markets relatively buoyant today.”

Nearly all of Canada’s 10 main sectors were higher. Leading the way was the heavyweight materials group, which jumped 2.2 percent. Most of the gains came from gold miners, as bullion prices rose on hopes of further monetary easing by the U.S. Federal Reserve. <GOL/>

“That might be acting as a positive catalyst for the markets,” said Petursson, but added that if the U.S. central bank were to act, it likely wouldn’t be until later this summer.

Barrick Gold (ABX.TO), the world’s top gold producer, was up 2.2 percent at C$41.18, while Goldcorp Inc (G.TO) climbed 1.3 percent to C$40.68. Mid-level miner Kinross Gold (K.TO) spiked nearly 4 percent to C$9.39.

Yamana Gold Inc (YRI.TO) rose 2.4 percent to C$16.75 after the gold miner said it would buy competitor Extorre Gold Mines Ltd XG.TO for C$412.9 million ($403.44 million) to build its portfolio of high-grade gold and silver deposits in Argentina. Yamana also raised its quarterly dividend by 18 percent. Extorre’s shares surged 68 percent to C$4.27.

“You have these gold companies that historically haven’t been big dividend payers, but now they’re stepping up recognizing what investors want and providing that,” said Petursson.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE finished up 105.68 points, or 0.9 percent, at 11,630.23. It was its highest close in nearly two weeks.

Canada’s small defensive healthcare sector rose 2.2 percent, led by drugmaker Valeant Pharmaceuticals International Inc (VRX.TO), which jumped 3.3 percent to C$47.42. On Friday, Valeant said it will buy privately held drugmaker OraPharma for about $312 million, to enter the dental market.

Potash Corp (POT.TO) gained 1.6 percent to C$39.92 as the fertilizer producer was helped by higher corn and soy prices on fears that dry conditions might limit U.S. crop prospects.

Markets initially rallied on news that Greece’s center-right New Democracy party, which backs Athens’ international bailout plan, is pushing to form a coalition after its narrow victory in Sunday’s election.

However that optimism was curbed by rising Spanish and Italian bond yields and after German Chancellor Angela Merkel said on Monday she does not see any reason to speak about a new aid package for Greece.

“People are more concentrated on what’s after Greece and now they’re talking about the Spanish and Italian markets,” said Sid Mokhtari, market technician and director, institutional equity research, CIBC World Markets. “No one wants to make a directional bet, that’s why volume is pretty tame and on the lighter side.”

Canadian financials were the lone negative sector on Monday, falling 0.3 percent. Losses were driven by Royal Bank of Canada (RY.TO), down 0.7 percent to C$50.90, Toronto-Dominion Bank (TD.TO), off 0.5 percent at C$78.57, and Bank of Nova Scotia (BNS.TO), which slid 0.7 percent to C$51.60.

In other news, shares of Research in Motion Ltd RIM.TO RIMM.O shed 2.7 percent to C$10.87 after contract electronics manufacturer Celestica Inc (CLS.TO) said it will stop making products for the struggling BlackBerry maker, its largest customer, over the next three to six months as the BlackBerry maker shrinks its global supply base.

($1=$1.02 Canadian)

Editing by Gary Crosse

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