July 29, 2008 / 9:06 PM / 11 years ago

UPDATE 3-Toronto stocks buoyed by banks, Teck deal

(Adds details, quotes)

* TSX gains as financials climb 2.9 percent

* Fording jumps after Teck Cominco’s $14.1 billion bid

* Energy shares retreat along with oil prices

By Leah Schnurr

TORONTO, July 29 (Reuters) - The Toronto Stock Exchange’s main index rose on Tuesday as Teck Cominco’s $14.1 billion offer for Fording Canadian Coal Trust and a gain by financials offset a drop in the energy and gold sectors, which followed commodities lower.

Fording FDG_u.TO jumped 7.8 percent after Teck TCKb.TO said it would buy the company in a cash and stock deal, making it the world’s No. 2 exporter of coal used in steel-making. Teck shares were up 6 percent.

But the energy sector hampered gains on the Toronto benchmark as oil fell to its lowest level in nearly three months. In the oil patch, Canadian Natural Resources (CNQ.TO) gave up 1.8 percent

Levente Mady, broker at MF Global Canada in Vancouver, said it was surprising there hasn’t been more merger and acquisition activity given that shares of resource companies haven’t run up as steeply as commodity prices recently.

“The stocks relative to what they have in the ground are trading very, very cheaply due to nervousness in the stock market in general,” Mady said.

The S&P/TSX composite index .GSPTSE closed up 38.59 points, or 0.29 percent, at 13,342.55 with six of its 10 main sectors higher.

Fording was up C$6.55 at C$90.35, while Teck gained C$2.44 to C$42.85.

The banking sector rose, shrugging off news that U.S. investment bank Merrill Lynch MER.N will have to take further writedowns and raise more capital, as investors hoped that financial institutions were getting closer to clearing their balance sheets.

Canadian Imperial Bank of Commerce (CM.TO) was up C$2.87, or 5 percent, at C$60.45, and Toronto-Dominion Bank (TD.TO) gained C$2.01, or 3.4 percent, to C$61.54, while the sector overall added 2.9 percent.

The heavyweight energy group fell 2 percent, with Suncor Energy (SU.TO) off 64 Canadian cents, or 1.2 percent, at C$53.96, and Canadian Natural Resources down C$1.44 at C$77.30.

A stronger U.S. dollar as well as growing worries over world demand for energy saw crude settle $2.54 lower at $122.19 a barrel, after sliding as low as $120.42.

Gold producers also undermined the index as bullion prices followed oil’s descent. Agnico-Eagle (AEM.TO) was down C$2.92, or 4.9 percent, at C$57.34, while Barrick Gold (ABX.TO) slipped C$1.94, or 4.3 percent, to C$43.50.

Amid a fresh batch of quarterly earnings, Rogers Communications (RCIb.TO) fell C$2.59, or 6.9 percent, to C$34.96 after the telecoms and media group swung to a profit but said growth at its mobile phone business slowed.

Market volume was 315 million shares worth C$6.8 billion. Decliners outpaced advancers 835 to 684. The blue chip S&P/TSX 60 index .TSE60 closed up 4.00 points, or 0.5 percent, at 798.38.

In New York, stocks rose with help from oil’s slide and optimism that Merrill Lynch’s writedown and share sale suggested a turning point in the credit crisis.

The Dow Jones industrial average .DJI closed up 266.48 points, or 2.39 percent, at 11,397.56, while the Nasdaq Composite Index .IXIC gained 55.40 points, or 2.45 percent, to 2,319.62. ($1=$1.02 Canadian) (Editing by Peter Galloway)

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