July 19, 2012 / 12:48 PM / 5 years ago

TSX extends rally on resource stocks

People walk past an electronic board displaying the midday TSX index in Toronto February 16, 2011.Mark Blinch

TORONTO (Reuters) - Canada's main stock index advanced for the fifth straight session on Thursday, led by energy and mining shares, but gains were limited as weak U.S. data and a spike in Spain's borrowing costs stoked concerns about the global economy.

European equities hit four-month highs and the benchmark S&P 500 index rallied to a fresh 2-1/2-month peak, as commodities rallied and investor sentiment was buoyed by solid corporate earnings. <MKTS/GLOB> .N

Seven of Canada's 10 main industry sectors finished higher. The heavily-weighted energy complex led the way, rising 1.6 percent as oil prices hit eight-week highs on escalating tension in the Middle East. <O/R>

The oil and gas patch's top performers included Suncor Energy (SU.TO), which rose 1.3 percent to C$30.59, Canadian Natural Resources (CNQ.TO), up 3.2 percent at C$28.98, and Canadian Oil Sands Ltd COS.TO, which jumped 3.4 percent to C$20.32.

"We're seeing a lot of the oil and gas service stocks, both in Canada and the United States moving up significantly," said Robert McWhirter, president and portfolio manager at Selective Asset Management Inc.

Trican Well Service Ltd (TCW.TO) also jumped nearly 9 percent to C$11.54.

Nexen Inc's NXY.TO shares shrugged off disappointing second-quarter earnings on Thursday to finish nearly flat at C$17.44. Profit at Canada's No. 6 independent oil explorer fell a steeper-than-expected 57 percent in the quarter, though it said much of the drop was due to a charge for a previously announced unsuccessful exploration well in the Gulf of Mexico.

The influential materials subindex rose 1.2 percent as gold and copper prices gained from a weaker U.S. dollar, which makes assets priced in greenbacks cheaper for holders of other currencies. <GOL/> <MET/L>

Mining gains were led by First Quantum Minerals (FM.TO), whose stock surged more than 10 percent to C$18.28. Canada's second-largest copper miner rose as prices for the red metal hit a two-week high on expectations that China could announce further monetary easing.

Canada's top gold producers were also firmer, with Goldcorp (G.TO) rising 2.2 percent to C$33.60, and Barrick Gold (ABX.TO) advanced 1.2 percent to C$35.08.

"The golds and metals were very oversold, so we're getting a bounce," said John Ing, president of Maison Placements Canada.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 86.55 points, or 0.75 percent, at 11,665.70. At its peak, it touched 11,674.37 points -- its highest level since July 10.

Canadian stocks also took their lead from U.S. markets, where the benchmark S&P 500 index reached its highest level since early May. .N

The recent rise in U.S. stocks has largely been driven by better-than-expected corporate earnings, with the latest positive signal coming from technology giant IBM (IBM.N), which raised its full-year profit forecast late on Wednesday.

The recent upswing in North American markets may signal the worst is over and that equities are poised to bounce higher, said McWhirter.

"On a relative basis earnings on stocks appear to be very attractive versus U.S. 10-year bonds," he added.

The positive sentiment was tempered, however, by weaker-than-expected readings on U.S. manufacturing, housing and labor markets. Adding to investor concern was a spike in Spain's borrowing costs, which intensified fears Madrid may eventually need a full-blown sovereign bailout.

In Canadian earnings news, Shoppers Drug Mart Corp's SC.TO shares rose 1 percent to C$43.07 after Canada's largest pharmacy chain said on Thursday quarterly earnings edged higher after excluding a charge for store closures.

($1=$1.01 Canadian)

Editing by Carol Bishopric

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