TSX up for sixth day amid hopes for central bank steps to help economic growth

TORONTO – The Toronto stock market extended a string of gains Wednesday as equities continued to find favour amid expectations that central banks in Europe will come out with new measures to support economic growth.

The S&P/TSX composite index gained 65.12 points to 11,913.87 on top of a 252-point surge on Tuesday, while the TSX Venture Exchange was points 16.4 higher at 1,241.9. The U.S. stock markets were closed for the Independence Day holiday.

The Canadian dollar was off 0.07 of a cent at 98.7 cents US.

All TSX sectors were positive save for some weakness in the consumer staples group. Lift was supplied in part by a 1.63 per cent rise in the consumer discretionary sector, led by gains in auto parts companies following the release of strong U.S. auto sales data on Tuesday. Magna International (TSX:MG) gained $2.42 or 6.05 per cent to $42.43 and Martinrea International (TSX:MRE) was up 27 cents at $8.53.

Financials also advanced with Royal Bank (TSX:RY) ahead 63 cents to $53.72 and Scotiabank (TSX:BNS) up 51 cents at $53.84.

The TSX has surged about 579 points or 5.1 per cent over the past six sessions to a fresh two-month high amid growing expectations that policy-makers will use fiscal and monetary stimulus to bolster flagging growth.

The European Central Bank and the Bank of England are scheduled to meet Thursday. Analysts are expecting the ECB to cut its key rate by up to half a percentage point and the U.K. central bank to boost the amount of money in circulation.

“It wouldn;t surprise me much because there aren’t any statistics talking about how strong the economy is anywhere in the world and inflation is much lower than expected,” said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier.

There was also relief after Europe’s leaders appeared at the end of last week to have finally come up with plans showing they are serious about restoring confidence in the eurozone.

Among other things, the plan allows European bailout funds to pump money directly into troubled European banks, rather than make loans to governments to bail out the banks. The move rescues the banks without putting strapped countries deeper in debt.

But Nakamoto considers the recent strong gains a relief rally which lacks the means to be more significant.

“People have very low expectations,” he said.

“With Europe, we’ve been disappointed so many times. Growth is still slow, I don’t see a bottoming process here. And earnings expectations are too high.”

Commodity prices were lower in electronic trading on the New York Mercantile Exchange following significant increases over the previous three sessions.

The August crude contract backed off 61 cents to US$87.05 a barrel late in the afternoon after growing tensions with Iran helped push crude up almost US$4 on Tuesday. That still leaves crude up about US$10 from last Thursday.

The energy sector was ahead 0.56 per cent and Cenovus Energy (TSX:CVE) gained 32 cents to C$34.29 while Canadian Oil Sands (TSX:COS) improved by 37 cents to $20.42.

The metals and mining sector was up one per cent as the September copper contract dipped two cents to US$3.52 a pound — still up over five per cent since last Thursday. Ivanhoe Mines (TSX:IVN) slipped 14 cents to C$10.09 while HudBay Minerals (TSX:HBM) rose 20 cents to $8.41.

The gold sector was flat as August bullion stepped back $6.80 to US$1,615 an ounce. Barrick Gold Corp. (TSX:ABX) was down 63 cents at C$38.87 after the Canadian mining giant suffered a legal reversal that may affect development of the company’s Pascua Lama project on the border between Argentina and Chile.

Argentina’s Supreme Court decided Tuesday to remove injunctions that have blocked key parts of a law to protect glaciers. Barrick argued it shouldn’t need to provide the national government with new environmental assessments.

On the corporate front, the takeover of the operator of Canada’s major stock exchanges cleared a pair of key regulatory hurdles as the Competition Bureau said it will not challenge the proposed takeover of the TMX Group (TSX:X) by the Maple Group and the Ontario Securities Commission gave its approval and published final recognition orders for the deal. TMX shares gained $1.56 to $48.41.

Trican Well Service Ltd. (TSX:TCW) shares fell 87 cents or 7.12 per cent to $11.35 after the company warned that it expects to post a loss of between 32 and 42 cents per share in the second quarter — much worse than analysts have been anticipating.

Meanwhile, shares of Avion Gold Corp. (TSX:AVR) jumped 9.5 cents or 21.35 per cent to 54 cents after it said a stalled expansion at the Tabakoto mine in western Africa will be restarted late this year or early in 2013. The expansion had been put on hold in May due to political unrest in Mali that caused some of Avion’s foreign workers to leave the country.