August 13, 2013 / 1:43 PM / 6 years ago

Banks drive TSX to two-week high as data brightens mood

TORONTO (Reuters) - Canada’s main stock index touched a two-week high on Tuesday, lifted by positive economic signals as well as comments by a U.S. Federal Reserve official that data was too mixed for the Fed to detail an exit strategy from its stimulus program.

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

Figures showed U.S. retail sales rose in July at the fastest pace in seven months, and that German analyst and investor sentiment rose more than expected in August.

But U.S. economic performance is too mixed for Fed policymakers to lay out a detailed path for reducing and eventually halting their asset-purchasing program next month, Atlanta Fed President Dennis Lockhart said on Tuesday.

Financial stocks benefited from the economic optimism and had the biggest positive influence on the index as investor sentiment brightened. The group has climbed close to 10 percent since hitting a low in April, and expectations have been building for the bank earnings season later this month.

“I do see some constructive activity on the banks,” said Keith G. Richards, portfolio manager and technical analyst at ValueTrend Wealth Management. “They’re starting to look a little bit more bullish.”

“If you do see the banks dip in the next month or two, there can be a buying opportunity,” he added.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed up 47.92 points, or 0.38 percent, at 12,642.19, after reaching 12,655.79, its highest level since July 30.

Six of the 10 main sectors on the index were higher.

Financials, the index’s most heavily weighted sector, advanced 1 percent. Royal Bank of Canada (RY.TO) rose 1.1 percent to C$64.05, playing the biggest role of any single stock in leading the market higher. Toronto-Dominion Bank (TD.TO) climbed 1 percent to C$87.24.

Near the end of August, Canadian banks are expected to report a small rise in quarterly profits with lending volumes restrained by economic uncertainty and a slowing housing market.

“You’ll see a big effort on costs by the banks,” said Matt Skipp, president of SW8 Asset Management. “It’s still an extremely tough net interest margin environment.”

Skipp said he finds the banks more expensive than their peers in Europe and the United States and said he wouldn’t be surprised if bank stocks pulled back after the quarterly reports.

The index’s materials sector, which includes mining stocks, slipped 0.7 percent. Goldcorp Inc G.TO fell 1.1 percent to C$29.30, and Barrick Gold Corp (ABX.TO) lost 1.8 percent to C$18.40.

($1=$1.03 Canadian)

Additional reporting by Cameron French, editing by Nick Zieminski and Peter Galloway

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