TORONTO (Reuters) - Canada’s main stock index recorded one of its biggest jumps of the year on Thursday, hitting a one-month high after Federal Reserve Chairman Ben Bernanke calmed market fears when he reiterated support for the U.S. central bank’s stimulus program.
The rally sparked gains across every major sector and helped the Toronto market, up for a fourth straight session, turn positive on the year.
Gold producers showed the sharpest gain, climbing 6.6 percent. Barrick Gold Corp (ABX.TO) was up 7.9 percent and Goldcorp Inc (G.TO) rose 7.3 percent, with the two having a major influence on the index’s rise.
Bernanke said on Wednesday the Fed must keep a stimulative monetary policy in place due to weak to inflation levels and a high unemployment rate.
“Bernanke went out of his way to assuage the market’s concerns,” said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver. “Sure, the Fed is going to taper at some point, but just not yet.”
“This is a relief rally,” he added. “Does it have the potential to ride up even higher in the short term? I think it does.”
Markets are overreacting today, said Peter Westaway, chief economist at Vanguard Asset Management Ltd, a unit of Vanguard Group Inc, which manages over $2.4 trillion in assets.
“The market has perhaps got a little bit overexcited about what the Fed said,” Westaway said. “I‘m slightly surprised quite how much the market has taken it as a signal that policy is going to be looser for much longer.”
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was up 186.33 points, or 1.51 percent, at 12,493.26, after reaching 12,496.29, its highest in more than a month.
“As the market moves higher, the non-believers start jumping in, and that’s what you need for market momentum,” Picardo said. “It’s an encouraging sign for the TSX.”
All of the 10 main sectors on the index were higher.
The materials sector, which includes mining stocks, gained 4.6 percent, helped by the advances in gold-mining stocks. The bullion price rose 1.3 percent to a near three-week high. <GOL/>
Financials, the index’s most heavily weighted sector, were up 0.9 percent. Royal Bank of Canada (RY.TO), the country’s biggest lender, climbed 0.6 percent to C$61.62, and Bank of Montreal (BMO.TO) rose 1.1 percent to C$62.87.
Vanguard’s Westaway said the aggressively accommodative policies that global central banks have adopted have taken markets into uncharted territory. “There’s no track record for markets to fall back on. There’s no playbook for policymakers to look at.”
“Overall, the global economy is on the mend, but there are still downside risks,” he added, saying he sees a gradual stimulus rollback. “I don’t think investors can sleep easy.”
Editing by Peter Galloway and Diane Craft