March 23, 2010 / 9:51 PM / 9 years ago

CANADA STOCKS-TSX rallies for second day as banks, miners star

* TSX rises 0.65 percent to 12,044.54

* Financial, mining issues lead the way

* All 10 main sectors finish higher (Adds details, quotes)

By Claire Sibonney

TORONTO, March 23 (Reuters) - Toronto’s main stock index was higher for a second straight session on Tuesday, led by a rally in financial and mining issues, which lifted the index back over the 12,000 mark.

The TSX mining subsector was up 2.3 percent, after Quadra Mining’s QUA.TO C$1.6 billion all-stock deal to buy FNX Mining Co FNX.TO spurred excitement about the potential for further mergers and acquisitions in the sector. [ID:nSGE62M0FF]

FNX gained almost 2 percent to C$15.14, while Quadra skidded 2.3 percent to C$16.98. Base metals major Teck Resources TCKb.TO rose 2.5 percent to C$41.55.

“We expect more deals to happen. Companies have seen a nice recovery in their stocks so they’re going to be able to use that as currency to make acquisitions,” said Barry Schwartz, vice-president and portfolio manager at Baskin Financial Services.

“And, in the meantime, commodity prices have been higher so the companies’ balance sheets are starting to improve.”

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed up 77.37 points, or 0.65 percent, at 12,044.54. All 10 of its main sectors were higher.

Strong gains from the heavily weighted banking issues also helped lift the index, with Royal Bank of Canada (RY.TO) up 1.1 percent at C$60.24 and Bank of Montreal (BMO.TO) gaining 1.2 percent to C$62.31.

Financials got a boost on Tuesday from data that showed Canada’s composite leading indicator rose 0.8 percent in February, posting its ninth straight gain due to strong household demand and a recovery in manufacturing. [ID:nN23240971]

“I’m surprised at the continued strong move on Canadian banks. They’re expensive, based on current earnings, but as the economy recovers, loan loss provisions should drop dramatically, which makes earnings grow dramatically for 2011, making the banks look inexpensive on a forward basis,” Schwartz said.

Recent strong earnings reports from the banks and a healthy outlook have also renewed hopes they are primed to raise dividends.

“There is no negative news coming from the banks. They continue to raise capital and have certainly padded their balance sheets,” said Fred Ketchen, director of equity trading at ScotiaMcLeod.

“We did not see last year any dividend increases from our major banks. Don’t be surprised if we see some this year.”

Energy shares were slightly higher with oil prices ticking up to near $82 a barrel. [O/R] [ID:nN23250133]

“There is a real big demand for oil and that’s the result of the price and a result of global recovery, said Schwartz.

“Valuations on oil stocks are still attractive, especially Canadian ones, but there’s not a ton of upside.”

Shares of Suncor Energy Inc (SU.TO), Canada’s largest oil company, were up 0.6 percent at C$31.40 while natural gas major EnCana Corp (ECA.TO) gained 1.3 percent to C$31.49.

Healthcare stocks closed the session up 0.9 percent, a day after a landmark bill to overhaul the U.S. healthcare system brought relief to investors.

Life sciences company MDS Inc MDS.TO gained 2.2 percent to C$8.73 while Biovail Corp BVF.TO, the country’s largest publicly traded drugmaker, rose 1.1 percent to C$16.45.

$1=$1.02 Canadian Editing by Rob Wilson

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