September 18, 2008 / 3:25 PM / 11 years ago

UPDATE 2-Toronto stocks surge on central bank rescue effort

*Financial services sector up nearly 4 percent

*Energy stocks rise with oil price

*Maple Leaf Foods up after meat plant output resumes

(Adds details)

TORONTO, Sept 18 (Reuters) - The Toronto Stock Exchange’s main index soared on Thursday morning after central banks around the world poured in $180 billion in extra liquidity to calm markets made jittery by the mayhem on Wall Street.

The rally reversed a nearly 3 percent tumble on Wednesday, when the Toronto index dipped into bear-market territory, down 21 percent from its June 18 peak.

The central bank injection [ID:nSP129521] comes after the U.S. government earlier this week rescued insurer American International Group (AIG.N) with an $85 billion loan to stave off its bankruptcy, a move that was met with trepidation as investors worried the bailout wouldn’t be enough to stem the financial turmoil. [ID:nN13574113]

Thursday’s rally is a reaction to hitting bear territory and to the move by central banks, said Irwin Michael, portfolio manager at ABC Funds.

“It’s a tug of war,” he said. “On the one hand you still have the negativity of uncertain hedge funds and various brokerage houses. You’ve also got people looking for a hedge, and the hedge is gold and maybe back into oil.”

At midmorning, the S&P/TSX composite index .GSPTSE was up 357.72 points, or 3 percent, at 12,235.41, with all of its 10 main groups higher. Earlier, the index soared more than 500 points.

The heavily-weighted financial services sector rose 3.9 percent with Sun Life Financial (SLF.TO) up 1.4 percent at C$36.26.

Insurer Great-west Lifeco (GWO.TO) was up 6.7 percent at C$32.47 after outlining its exposure to Lehman Brothers Holdings Inc LEH.N fixed income securities and AIG fixed income and derivative securities. [ID:nN18372534]

The big energy sector spiked 3 percent as oil rose to around $97 a barrel — down from a high above $100 earlier in the day — on the central bank moves and as the U.S. energy sector struggled to restart operations shut down for Hurricane Ike. [ID:nSP354592]. In the oil patch, Canadian Natural Resources (CNQ.TO) rose 4.6 percent to C$80.09.

The materials group contributed a 3 percent rise as the glow of safe-haven buying pushed bullion higher [ID:nLI386006], while some base metals rebounded. [ID:nLI461400]

Among the gainers, Agnico-Eagle Mines (AEM.TO) climbed 1.6 percent to C$64.00, and Potash Corp of Saskatchewan Inc POT.TO rose 3.4 percent to C$176.48.

Maple Leaf Foods (MFI.TO) climbed 4.1 percent to C$8.99 after it said production resumed at the deli meat plant at the center of this summer’s deadly outbreak of listeriosis food poisoning in Canada.

The company’s chief executive said on Wednesday it would probably be reasonable to expect products on the shelves next week. [ID:N17293557]

In Canadian economic news, wholesale trade beat expectations in July to rise 2.3 percent from June on gains across most sectors, led by agricultural supplies and building materials, Statistics Canada said. ($1=$1.07 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)

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