February 22, 2012 / 10:07 PM / 7 years ago

CANADA STOCKS-TSX rallies to 5-month high on gold, U.S. data

* TSX ends up 77.90 pts, or 0.6 pct, at 12,701.26

* At highest level since Sept. 7, 2011

* Materials issues rise, financials fall

* U.S. housing data boosts sentiment

* Weak euro zone, China data weigh

By Jon Cook

TORONTO, Feb 22 (Reuters) - Canadian stocks rose to a five-month high on Wednesday as gold-mining issues surged 2 percent on higher bullion prices and strong U.S. housing data.

Bullion hit a three-month high as technical buying helped the precious metal surpass a key resistance level near $1,765 an ounce.

“Right now you’re looking at gold and it looks like it wants to break out again,” said Levente Mady, market strategist at Union Securities. “If we get past $1,800, the next stop is $1,925 and other than that the sky’s the limit.”

Gold’s upswing boosted the index’s heavyweight materials sector by 1.8 percent. Barrick Gold, the world’s top gold producer, jumped 2.5 percent to C$49.48, while Goldcorp rose 2.3 percent to C$49.26.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 77.90 points, or 0.6 percent, at 12,701.26, its highest close since Sept. 7, 2011.

Oil and gas issues were up 0.8 as Brent crude oil reached a nine-month high on Wednesday, supported by Iran-related supply worries. Suncor Energy was the biggest heavyweight gainer, rising 2.5 percent to C$35.61.

Talisman Energy shares climbed 3 percent to C$14.26 after the oil and gas producer said it reached a $280 million ($280 million) deal with Mitsubishi Corp, giving the Japanese company entry into nine of Talisman’s onshore licenses in Papua New Guinea’s natural gas-rich Western Province.

Resource gains have led the TSX to outdistance the major U.S. stock indexes this week and Mady said that trend could continue if gold and oil prices stay strong.

“Even if we do get a bit of a breather in the States, I would expect Canada to continue to outperform here on a relative basis,” he added.

The market mood was also lifted as U.S. home resales surged in January to a 1-1/2 year high, while the supply of properties on the market was the lowest in almost seven years, pointing to a nascent housing recovery in Canada’s top trading partner.

The gradually brightening U.S. economy has helped the TSX rally more than 5 percent this year despite continued uneasiness about conditions in Europe.

“It’s a North American phenomenon,” said Rick Hutcheon, president and chief operating officer at RKH Investments. “We’ve become a little more inward looking and a lot of that has been forced on us by the grief that’s going on in Europe.”

Potash Corp, the world’s top fertilizer producer, rose 1 percent to C$47.34 on hopes for increased U.S. demand.

Optimism about Tuesday’s approval by European officials of another multibillion-dollar bailout for Greece waned on Wednesday as data showed the euro zone may be sliding back toward recession.

Preliminary data also showed China’s new export orders shrank in February in a worrying sign that the euro area debt crisis is afflicting the Asian powerhouse.

Financial shares fell 0.3 percent. Bank of Nova Scotia led the retreat, sliding 0.8 percent to C$53.71.

In individual company news, Rogers Communications rose 1 percent to C$38.15 after it reported a stronger than expected quarterly profit and raised its dividend.

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