The Toronto stock market was positive Monday after China’s decision to allow its currency to appreciate against the U.S. dollar raised hopes for an economic rebound.
But the S&P/TSX composite index was well off early highs as losses in the gold sector picked up and early enthusiasm for the China move eased.
The S&P TSX Composite Index ended the session ahead only 8.49 points to 11,936.08. The main index came off a 149-point surge.
China currently keeps the yuan artificially low to boost exports, giving the country’s manufacturers an edge in selling cheaper exports to other countries. But aside from creating a more level field for exporters, analysts said the move was also important for what it reflected about China’s view of how the global economy is recovering from recession.
Also, the threat of inflation to China should be reduced by the change in currency policy, easing investors’ worries that interest rates could be hiked to cool off the economy. However, experts also noted that any reform to China’s currency policy would be gradual.
Energy and mining stocks were also off early levels while prices for oil and copper moderated as investors thought the initial reaction to the news was likely overdone.
The health-care segment was the biggest percentage advancer amid news of major dealmaking that will see the country’s largest publicly-traded pharmaceutical company, Biovail Corp., merge with California-based Valeant Pharmaceuticals International
The friendly deal between Biovail and Valeant offers shareholders of the U.S. company about $3.2 billion U.S. worth of cash and stock. The combined company will be called Valeant
Pharmaceuticals International Inc. but Biovail’s current shareholders will own slightly more than half of all the stock and the corporate headquarters will be in Mississauga, Ont., where Biovail is based. On the TSX, Biovail shares advanced $2.21 or 14.9% to $17.08
The base metals sector was up as the July copper contract in New York climbed six cents to $2.94 U.S. a pound. Teck Resources rose $1.28 to $36.67.
HudBay Minerals climbed 91 cents to $12.63 after the company appointed David Garofalo as its new president and chief executive officer. Garofalo has been most recently chief financial officer of Agnico-Eagle Mines Ltd.
Transportation stocks rose along with mining stocks. Canadian National Railways was up 63 cents to $64.29 and Canadian Pacific Railway climbed 73 cents to $62.16.
The energy sector was ahead as Suncor Energy rose eight cents to $34.52 and Canadian Oil Sands Trust was up 35 cents to $29.27.
The financials sector was also positive, as Royal Bank improved by 31 cents to $54.83 and Manulife Financial rose 27 cents to $16.81.
The gold sector was the major decliner, as Barrick Gold Corp. faded $1.15 to $45.86 while Kinross Gold Corp. was down 61 cents to $18.50.
In other corporate news, shares in Telus Corp. rose 34 cents to $40.33 after the telecom reached a tentative labour agreement with 1,000 call centre, office and maintenance workers in Quebec.
Western Copper Corp. will ask Yukon’s highest court to overrule a territorial board, which has rejected the company’s application for a water licence at an open-pit copper project.
The Vancouver-based company had applied to the Yukon Territory Water Board in May for a licence for its Carmacks Copper Project. But the board said Western Copper’s plan contained several critical flaws, including the use of unproven technology and inadequate plans to manage waste.
Western Copper shares slipped two cents to $1.06.
Shares in Calgary-based oil and gas producer Compton Petroleum Corp. lost six cents to 75 cents after it said that its common shares will discontinue trading on the New York Stock Exchange effective this Friday. The company will continue to trade on the Toronto Stock Exchange.
The Canadian dollar moved 0.29 cents lower to 97.64 cents U.S.
ON BAYSTREET
All but three of the 14 TSX subgroups remained higher throughout the day. Health-care issues climbed 4%, metals and mining leaped 3% and global base metals gained 2.9%.
Gold stocks tailed off 2.9%, among the laggards, while materials slid 1.4%, and information technology eased back 1.3%.
The TSX Venture Exchange docked 15.15 points to 1,473.03 while the Nasdaq Canada index fell 19.12 points to 677.03
ON WALLSTREET
In New York, stocks turned lower Monday, erasing morning gains, as investors welcomed news that China is allowing its currency to gain against the dollar, but showed caution after the recent advance.
The Dow Jones industrial average fell 8.23 points on the day to 10,442.41
The S&P 500 index eased back 4.31 points to 1,113.20. The Nasdaq composite index lost 20.71 points to 2,289.09.
Stocks rallied in the morning, trimmed some gains in the early afternoon, and then tumbled near the close.
He said this trend reflects the increased volatility that's been in markets lately but also the fact that stocks are pretty fairly valued at this point, relative to earnings expectations.
Stocks have risen for two weeks straight, with the major indexes all up more than 6%, as buyers returned following the May selloff. That selloff followed a roughly 80% rally on the S&P 500 off the March 2009 lows.
Worries that Europe's debt problems will slow down the global economic recovery dragged on stocks last month. Weaker-than-expected reports on housing, jobs and manufacturing added to the wariness.
But those worries have been set aside lately as investors scooped up shares beaten down in the recent rally. Market gains have also been driven by some supportive technical factors.
Investors got good news over the weekend when China said it will allow its currency, the yuan, to rise against the dollar, after it was pegged to the dollar over the last two years.
Amazon shares fell after the company cut the price of its Kindle electronic reader, the latest salvo in a pricing war that saw Barnes & Noble cut the price of its Nook earlier in the day.
Freeing up the currency could be a boon to U.S. manufacturers and exporters, who suffered as the artificially low yuan made imports to China expensive.
However, China cautioned that the yuan's rise would happen only gradually.
On Monday, the dollar was barely changed versus the yuan and was 0.5% higher versus the yen. The euro barely budged versus the U.S. currency. The weak euro has been something of a proxy for investor worries about the economy over the last few months.
A variety of stocks declined, with big tech issues leading the way, including Microsoft, Yahoo and Amazon
Treasury prices dropped, raising the 10-year note's yield to 3.24% from 3.22% Friday. Bond prices and yields move in opposite directions
The price of a barrel of oil improved 27 cents to $77.45 U.S.
Gold prices erased seven dollars to $1,234 U.S. an ounce.
Related Stories
