TORONTO (Reuters) - Canada’s main stock index rallied to a one-month high on Wednesday, led by a jump in gold prices and mining shares after the Federal Reserve unveiled a fresh round of bond buying to boost the struggling U.S. economy.
The Fed’s announcement trumped concerns about ongoing U.S. congressional negotiations aimed at averting steep tax hikes and spending cuts due to kick in early in 2013.
In an unprecedented step, the U.S. central bank said it would hold interest rates near zero until the U.S. unemployment rate falls to 6.5 percent as it pledged to keep pumping more money into the economy.
“It’s all part of the broader issue of an increase in confidence and it looks like the U.S. is going to muddle through, it looks like Europe is going to muddle through and we’re seeing some better numbers out of China,” said Brad Radin, chief executive of Radin Capital Partners.
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed up 70.73 points, or 0.58 percent, at 12,353.09, after earlier reaching 12,365.83, its highest since November 6.
Seven of the 10 main sectors on the index advanced, led by a nearly 2 percent jump in the materials sector, home to miners.
Among the top gainers, Barrick Gold Corp (ABX.TO) rose 3 percent to C$34.56, and Goldcorp Inc (G.TO) climbed 2.9 percent to C$37.63 as bullion’s inflation-hedge appeal received a lift from the Fed. <GOL/>
“Gold has a tailwind from monetary policy,” said Shailesh Kshatriya, senior investment analyst at Russell Investments Canada. He added that gold would continue to benefit from monetary policy, and there was more interest in central banks owning gold given the macroeconomic uncertainty.
The financial sector, the index’s largest, rose 0.5 percent. Royal Bank of Canada (RY.TO) was up 0.7 percent to C$59.27, Toronto Dominion Bank (TD.TO) gained 0.6 percent at C$81.08, and Bank of Nova Scotia (BNS.TO) added 0.7 percent to C$56.88.
Kshatriya, who forecasts that the TSX will reach 12,600 by the end of 2013, said he sees more opportunities in the metals and mining sectors than in energy and financial stocks.
In company news, Cenovus Energy (CVE.TO) dropped 1.1 percent to C$33.34 after Canada’s second-largest independent oil producer warned that fourth-quarter cash flow will fall short of targets. It was the biggest drag on the index.
Additional reporting by John Tilak; Editing by James Dalgleish