TSX rises, traders encouraged by indications about Fed easing, China reforms

TORONTO – The Toronto stock market closed higher Friday amid optimism that the U.S. Federal Reserve likely won’t be cutting stimulus as early as thought while giving a muted response to a sweeping economic reform plan from the Chinese government.

The S&P/TSX composite index rose 51.19 points to 13,482.57.

The Canadian dollar rose 0.19 of a cent to 95.72 cents US amid strong manufacturing data for September.

Statistics Canada reported that manufacturing shipments rose 0.6 per cent to $49.9 billion in September. Economists had expected they’d rise about 0.5 per cent.

U.S. indexes were higher with the Dow Jones industrials ahead 85.48 points to 15,961.7, the Nasdaq up 13.23 points at 3,985.97 and the S&P 500 index 7.56 point higher at 1,798.18.

Markets continued to find lift after the woman most likely to succeed Ben Bernanke at the helm of the Fed made it clear that she’s prepared to continue the central bank’s low interest rate policies to keep the U.S. economic recovery on track.

During a confirmation hearing before the Senate banking committee, Janet Yellen warned critics that any potential risks posed by those policies are outweighed by the risk of leaving a still-weak economy to survive without them.

Her statements convinced markets that the central bank won’t reduce its US$85 billion of monthly bond purchases until at least March.

But it could come earlier depending on economic performance so every data point will be scrutinzed for clues. Traders also looked ahead to Wednesday’s release of the minutes of the Fed’s latest interest rate meeting in October.

“The (October) jobless number was a little bit better, retail numbers were a bit better and so there’s probably a little bit of a probability that December could see tapering,” said Sadiq Adatia, chief investment officer at Sun Life Financial.

“I’m not thinking that’s the case but it has opened the door for the potential there.”

Meanwhile, in a report issued after a closely watched Communist party conference, China’s ruling party pledged to ease barriers to private competitors in markets controlled by state companies. At the same time, they reaffirmed that government-owned industry is the core of the economy.

The report left out many details of what role private or foreign competitors might be allowed in government-controlled industries such as energy, telecoms and finance. But it outlined changes clearly intended to make industries more efficient and productive by injecting more competition.

Analysts say markets were expecting something more from Chinese leaders, who are under pressure to replace an economic model based on exports and investment that delivered three decades of rapid growth but has now run out of steam.

“It looks like they are going to do some reforms, which should help out growth over time,” Adatia said.

“But I don’t think it was as immediate and because of that, markets didn’t take off (on the news). So it isn’t negative, it isn’t overly optimistic, just slightly positive.”

Most TSX sectors were positive and the energy sector led advancers, up one per cent as December crude edged up eight cents to US$93.84 a barrel. Bonavista Energy (TSX:BNP) rose 48 cents to C$12.71 while Canadian Natural Resources (TSX:CNQ) ran up 99 cents to $34.10.

The telecom sector rose 0.85 cent as BCE (TSX:BCE) improved by 45 cents to $46.74.

Financials also lifted the TSX with a 0.4 per cent rise as CIBC (TSX:CM) advanced 67 cents to $90.92.

Copper prices inched higher after tumbling earlier in the week and the December contract was up one cent at US$3.17 a pound. The base metals component was ahead almost 0.2 per cent and Taseko Mines (TSX:TKO) fell three cents to C$2.17 while Sherritt International (TSX:S) gained 13 cents to $3.45.

The gold sector was the biggest decliner, down about 1.65 per cent even as December bullion closed up $1.10 to US$1,287.40 an ounce. Centerra Gold (TSX:CG) faded 19 cents to C$3.15 and Goldcorp (TSX:G) fell 50 cents to $25.40.

On the corporate front, private equity firm Onex Corp. (TSX:OCX) reported Friday that it earned US$399 million or $3.22 a share in its latest quarter, compared with a profit of $98 million or $1.50 per share a year ago. Revenue grew 16 per cent to $7.13 billion and its shares advanced $1.11 to $57.71.

Montreal-based Saputo Inc. (TSX:SAP) has raised its offer for an Australian dairy company, which is the focus of a heated takeover battle. Saputo’s new offer is $9 per share in Australian currency, valuing Warrnambool Cheese and Butter’s equity at about AUD$499 million, or about C$487 million. Saputo’s previous offer was AUD$8 per share. Saputo shares added 38 cents to C$49.08.