September 6, 2012 / 2:12 PM / in 5 years

TSX rallies to 2-week high on ECB, U.S. data

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

TORONTO (Reuters) - Canada’s benchmark stock index jumped more than 1 percent on Thursday, lifted by broad gains in commodity stocks, as a European Central Bank bond-buying plan and positive U.S. economic data boosted investor sentiment.

The index jumped in early trade after the ECB launched a potentially unlimited bond-buying program in a bid to draw a line under the region’s debt crisis. Signs of a pickup in the struggling U.S. labor market also added to gains.

“We got off to a pretty fast start and it never let up. It was a quite spectacular day for a change,” said John Kinsey, a portfolio manager at Caldwell Securities.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed 1.25 percent higher, adding 149.59 points to hit 12,139.73, the index’s highest closing level since May 2.

At one point it reached 12,144.34, its highest intra-day level since Aug 21. It was the biggest one-day gain for the index in about a month. All 10 major index sectors rose, led by the energy and materials groups.

Signs that European and U.S. growth could get back on track provided a fillip to Canada’s deep lineup of mining and oil and gas companies, which are acutely sensitive to global demand.

“It’s clearly a positive for this market - the Toronto market is a risk-on market, a commodity-weighted market - because we will not be able to get clarity on commodities if Europe is mired in recession and political stalemate,” said John Stephenson, senior vice-president at First Asset Investment Management Inc.

ECB President Mario Draghi sought to back up a July pledge to do whatever it takes to preserve the euro zone currency with the bond-buying plan, which he said would address bond market distortions and “unfounded” fears about the survival of the euro.

“They’ve really had to pull out the big bazooka, which is in essence to say ‘we stand by to buy unlimited quantities of sovereign bonds of distressed countries’,” said Gavin Graham, president at Graham Investment Strategy in Toronto.

Commodity prices were broadly higher, with oil and gold both notching gains. <O/R> LCOc1

The oil price was also boosted by U.S. government data that showed stockpiles fell more sharply than expected last week.

HEALTHY U.S. HELPS

Meanwhile, data showed U.S. companies added staff in August at the fastest clip in five months and a gauge of service sector employment also improved. Another report showed new claims for jobless benefits fell last week to the lowest level in a month.

“Most of our trade is still with the U.S.,” said Caldwell’s Kinsey. “We need a healthy U.S. economy to keep us in the black.”

Among oil and gas shares, Cenovus Energy Inc (CVE.TO) jumped 4.1 percent to C$33.30, Canadian Natural Resources (CNQ.TO) rose 2.5 percent to C$30.09 and Suncor Energy Inc (SU.TO) added 1.6 percent to C$31.85, accounting for the three biggest positive influences on the index.

Shares of ShawCor Ltd SCLa.TO surged 20.3 percent to C$42.20 after the company, which has a dominant position providing niche pipeline services to the oil and gas industry, said it was exploring the possibility of putting itself up for sale in a deal that could fetch C$3 billion ($3.05 billion) or more.

Major Drilling Group International Inc (MDI.TO) jumped 11.7 percent to C$10.20 after reporting record quarterly earnings and saying that demand remains strong.

Encana Corp (ECA.TO) gained 1.9 percent to C$21.77 after the natural gas producer said an internal investigation determined it did not collude with Chesapeake Energy Corp to lower the price of land acquisitions in Michigan two years ago.

Base metals miner Inmet Mining Corp IMN.TO gained 3.6 percent to C$45.77. It said it plans to expand its footprint in Panama with an offer to acquire Petaquilla Minerals Ltd PTQ.TO for about C$112 million.

($1=$0.98 Canadian)

Editing by Jeffrey Hodgson

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