November 20, 2012 / 1:12 AM / 6 years ago

TSX rallies on U.S. budget optimism

TORONTO (Reuters) - Canada’s main stock index jumped more than 1 percent on Monday, led by material and energy stocks as commodity prices advanced on hopes that a U.S. budget crisis will be averted.

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

Over the weekend, leading Democratic and Republican lawmakers expressed confidence that they could reach a deal to avert the “fiscal cliff”, a mix of tax increases and spending cuts starting early in the new year unless there is a deal on Capitol Hill.

“We started to see some headlines on Friday about resolving the fiscal cliff problems that we’re facing, and today we’re getting some follow-through on that front,” said Levente Mady, senior portfolio manager at PI Financial Corp in Vancouver.

“That’s driving not just equities, but commodities and currencies and the rest of the world really in general,” he said, noting that the U.S. Thanksgiving holiday week has historically trended higher.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended up 162.68 points, or 1.37 percent, at 12,040.40. All the 10 main sectors on the index were up.

Energy stocks rose 1.8 percent, tracking higher oil prices. Suncor Energy Inc (SU.TO) was up 3.3 percent at 32.59 and was the most influential gainer.

Oil prices rose more than 2 percent on optimism that a U.S. budget crisis will be averted and as rising violence in the Middle East raised concerns over oil supplies. <O/R>

Energy takeover targets Nexen Inc NXY.TO and Progress Energy Resources (PRQ.TO) bucked the broader trend after Canada’s government signaled different treatment for state-owned enterprises than for private companies in evaluating whether to approve foreign investment. <ID:L1E8MJBK4> Nexen dropped 1.4 percent to C$25.32 and Progress lost 1.9 percent to C$20.05.

Meanwhile, the materials group, which includes mining stocks, rose 2.1 percent. Goldcorp Inc (G.TO) was up 2.2 percent at C$40.61, and Agnico Eagle (AEM.TO) surged 5.8 percent to C$55.20.

The shares tracked bullion prices up as gold climbed more than 1 percent, helped by the “fiscal cliff” talks and hopes Greece would receive more funding. <GOL/>

The financial sector, the heaviest on the index, was up 1.1 percent. Royal Bank of Canada (RY.TO) gained 1.6 percent at C$56.53, and Toronto Dominion Bank (TD.TO) added 0.9 percent to C$79.57.

“If the market senses some (U.S. budget) agreement will be crafted, it will move,” said Irwin Michael, portfolio manager at ABC Funds.

“The market was oversold,” he said. “If we get any bit of good news, that will be reflected in the stocks.”

Investors were also encouraged by data that showed an advance in the U.S. housing sector. U.S. home resales unexpectedly increased in October, while separate data showed home-builder sentiment rose to its highest in over six years in November.

In individual company news, shares of Agrium Inc AGU.TO rose 3.3 percent to C$101.01 after its largest shareholder, Jana Partners, launched a proxy battle and named a slate of nominees to the board of the fertilizer maker.

Astral Media Inc ACMa.TO was up 3.1 percent to C$45.78 after BCE Inc (BCE.TO), Canada’s biggest telecom provider, said it would seek regulatory approval for a revised C$3 billion plan to take over the company.

Additional reporting by John Tilak; Editing by James Dalgleish

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