May 14, 2008 / 3:18 PM / 11 years ago

UPDATE 1-Toronto stock index surges on RBC writedown relief

(Adds details, analyst’s comments)

*TSX index hits record high

*Financials up after RBC details writedowns

*Modest U.S. inflation provides boost

By Jonathan Spicer

TORONTO, May 14 (Reuters) - The Toronto Stock Exchange’s main index advanced on Wednesday morning on relief that writedowns announced by Royal Bank of Canada (RY.TO) for its second quarter weren’t worse.

Financial stocks rose 1.2 percent, helping the index to a record high.

The Canadian benchmark also benefited from consumer price data that showed that U.S. inflation rose only modestly last month, leaving the door open for the Federal Reserve to cut interest rates further.

With banks taking the lead from recently hot resource shares, “various sectors are handing the baton to new sectors, and that’s good to see,” said Irwin Michael, portfolio manager at ABC Funds.

The S&P/TSX composite index .GSPTSE was up 104.02 points, or 0.7 percent, at 14,720.72. The rise would have been more pronounced if not for drops in the energy and consumer staples sectors.

RBC, the country’s biggest bank, climbed C$1.34 to C$49.96 after it said it will take a C$855-million writedown in the current quarter. The bank said a big part of the writedown reflects liquidity pressures on assets that it holds. See: [nN14461834]

“There was an expectation of a writeoff and it turned out to be less than what the market had expected,” Michael said of the stock’s rise.

Research In Motion RIM.TO, the BlackBerry maker, was also among the top weighted gainers, up C$3.02 at C$144.02.

Consumer price data showed the inflation rate was less than expected in the United States, Canada’s biggest trading partner, giving a boost to European and North American stocks alike. See: [nN14432716]

On the downside, oil and gas producers fell 0.2 percent as the price of U.S. crude oil dipped from record highs. The futures price was off more than 1 percent at $124.38 a barrel in commodities trade.

EnCana (ECA.TO), which received a big boost when it said earlier this week it would split into two separate entities, slipped 53 Canadian cents to C$90.32.

Inmet Mining IMN.TO was the biggest weighted loser — down C$9.24 at C$67.75 — after its targets and ratings were cut because of the suspension of a water permit at its Las Cruces project, its core asset, putting the mine’s start date in doubt. ($1=$1.00 Canadian) (Reporting by Jonathan Spicer; Editing by Peter Galloway)

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