TORONTO (Reuters) - Resurgent energy and mining stocks on Thursday helped Canada’s benchmark equity index regain ground it lost a day earlier as soft Chinese economic data kept alive talk that central bankers may ease monetary policy to stimulate growth.
Shares in Canadian oil and gas companies were lifted as investors bet that slowing Chinese inflation would give the central bank of the world’s second-largest economy space to further loosen policy.
The resource-heavy Toronto stock market pays close attention to the potential for policy change in China, said Stephen Wood, chief investment strategist at Russell Investments in New York.
“The slowdown in Europe, which is going to be with us for a good while, is probably less directly impactful on the commodity complex than what is going on in China, just because of the nature of their industrial makeup, export makeup and fabrication makeup,” he said.
Shares in oil and gas company Canadian Natural Resources Ltd (CNQ.TO) gained 6.2 percent to C$31.39, playing the biggest role of any stock in leading the index higher. The company said it would cut spending but nudged its production outlook higher.
Independent oil producer Crescent Point Energy Corp (CPG.TO) also helped pull the benchmark index up with a 4.8 percent jump to C$42.34 after posting a 55 percent increase in profit and raising its production forecast for the year.
The market was also encouraged by optimism that other central bankers could move to stimulate growth.
A European Central Bank governing council member said on Thursday the bank should be ready to intervene decisively soon to bring down excessive borrowing costs for Spain and Italy, while Wall Street also expects action from the U.S. Federal Reserve.
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed up 77.09 points, or 0.65 percent, at 11,858.13. The gain eclipsed a fall of about the same size on Wednesday.
U.S. stock markets notched modest gains on Thursday or none at all. .N
“We’re seeing the S&P 500 flat on the day and the TSX has got a nice gain to it, and that is very clearly a reflection of the sentiment around global growth,” said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.
Conjecture about Chinese central bank action arose after data on Thursday showed factory output growth in China slowed and consumer inflation fell to a 30-month low.
“If there is one country that’s going to move commodity markets, it’s going to be China if you can get demand back on track,” said Gareth Watson, vice president for investment management and research at Richardson GMP.
“The market is telling us they expect further steps to be taken in the near future,” he said, referring to U.S. and European central banks. “Whether they’ll be effective is a completely different issue.”
The Bank of Canada remains one of the only major central banks considering tightening policy, a view reiterated by Governor Mark Carney in interviews published on Wednesday.
Other stocks on the move included retailer Canadian Tire Corp Ltd (CTC.TO), which rose 4.8 percent to C$78.23 after reporting a higher profit.
Coffee chain Tim Hortons Inc THI.TO fell 2.8 percent to C$50.84 after reporting disappointing sales in Canada.
Editing by Jeffrey Hodgson; and Peter Galloway