July 26, 2012 / 3:46 PM / in 6 years

TSX rallies on ECB pledge, Barrick weighs

TORONTO (Reuters) - Canadian stocks had their biggest single-day gain in more than three weeks on Thursday, led by financial and resource shares, as European Central Bank President Mario Draghi’s pledge to protect the euro zone from collapse sparked a commodities rally.

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch

Global stocks rallied after Draghi, speaking in London, said the ECB was ready, within its mandate, “to do whatever it takes to preserve the euro.

The spurt of confidence in the outlook for the global economy offset weak earnings from Barrick Gold (ABX.TO) — the world’s largest gold miner.

“That relieved tension somewhat and you saw a chain reaction,” said Bob Gorman, chief portfolio strategist at TD Waterhouse. “As the euro rose, the U.S. dollar fell and in turn commodities rose.”

The euro rallied to a two-week high against the dollar on Draghi’s comments, encouraging investors to buy dollar-denominated commodities such as oil, gold and copper. <O/R> <GOL/> <MET/L>

Canada’s powerhouse energy sector jumped 1.8 percent, as U.S. oil prices rose on the improved confidence in Europe and on a sharp drop in U.S. jobless claims, which fell to a near four-year low.

Energy gains were led by top oil producer Suncor Energy (SU.TO), which rose 3.2 percent to C$31.86 after reporting a 28 percent jump in second-quarter profit earlier this week. The company on Wednesday also said it would scale back an ambitious growth program that had troubled some shareholders.

TransCanada Corp (TRP.TO) climbed 1.4 percent to C$44.80, and Enbridge Inc shares (ENB.TO) rose 1.1 percent to C$42.05.

The improved Europe sentiment helped Canadian financials, which rose 1 percent. Gains were led by Bank of Nova Scotia (BNS.TO), up 1.3 percent to C$51.28, Royal Bank of Canada (RY.TO), which edged up 0.9 percent at C$50.85, and Sun Life Financial Inc (SLF.TO), rising 4.2 percent to C$20.87.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE finished up 147.24 points, or 1.3 percent, at 11,639.75. It was the index’s largest one-day percentage jump since July 3.


Shares of Barrick, the world’s largest gold producer, plunged 4.2 percent to C$33.04 after the company reported a 35 percent decline in quarterly profit and said the cost of building its massive Pascua-Lama gold mine in South America would likely be 50 to 60 percent higher than the top end of its earlier estimate of $4.7 billion to $5 billion.

“The market is disappointed that companies are not in more control of their costs,” said John Hughes, senior mining analyst at Desjardins Securities. “That’s evident today in the Pascua-Lama project for Barrick.”

Barrick also announced it would defer work on its Donlin Gold mine in Alaska, a project it shares with fellow gold miner NovaGold Resources Inc (NG.TO). NovaGold’s shares tumbled more than 25 percent to C$4.07 on the news.

Despite the Barrick results, Canada’s heavily-weighted materials sector, which includes miners, finished up 1.6 percent.

Goldcorp Inc, Canada’s second largest gold producer, (G.TO) led gains, rising nearly 5 percent to C$36.50. Investors overlooked the company’s second-quarter loss, instead focusing on its adjusted profit, which was in line with analyst estimates.

Agnico-Eagle Mines Ltd (AEM.TO) saw its shares spike 7.6 percent to C$42.58 a day after it reported a 15 percent drop in its second-quarter adjusted profit, but raised its 2012 production outlook. The company also said it increased its gold output and that quarterly revenue rose to $459.6 million from $433.7 million a year earlier.

Resource stocks were also boosted on hopes that the ECB and the U.S. Federal Reserve will announce new stimulus measures when the central banks’ policy committees meet next week.

“To the extent that we get quantitative easing, either from Mr. Draghi or the Fed, it would be a real lift for gold and oil,” said Patricia Mohr, a commodity market specialist at Scotiabank.

Editing by Diane Craft

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