The Toronto stock market surged more than 400 points Wednesday after the Bank of Canada and other major central banks took coordinated action to provide added support to a global financial system.
The S&P TSX Composite climbed 471.61 points, or 4%, to 12,204.11
The TSX resource sector in particular benefited from steps by China, the world’s second biggest economy, to encourage growth.
Canada’s central bank is joining the Bank of England, the Bank of Japan, the European Central Bank, the U.S. Federal Reserve and the Swiss National Bank "to enhance their capacity to provide liquidity support to the global financial system."
The central banks are making it cheaper for banks to get U.S. dollar liquidity when they need it, starting next Monday. They are also taking steps to ensure banks can get ready money in any currency if market conditions warrant.
The Canadian dollar advanced 1.14 cents to 98.06 U.S. cents, on the announcement
The reassurance from major central banks further enhanced positive sentiment arising from moves by China to ease lending and encourage growth.
China’s central bank announced that the amount of money China’s commercial lenders must hold in reserve will be cut by 0.5% of their deposits, effective Dec. 5. It was the first easing of monetary policy in three years.
The energy group ran up while Suncor Energy gained $1.39 to $30.63 and Canadian Natural Resources advanced $1.77 to $38.12.
The base metals component gained as hopes for higher demand from China sent the March copper contract ahead 19 cents to $3.58 U.S. China is the world’s biggest consumer of copper. Teck Resources was ahead $3.08, or nearly 9%, to $37.35 while HudBay Minerals rose 69 cents to $10.35.
The gold sector climbed while Barrick Gold Corp. was ahead $2.58, or 5%, to $54.05 and Goldcorp Inc. advanced $3.71, or 7.2%, to $54.95.
Financials rallied strongly on the central bank action, as Bank of Montreal improved by $2.25 to $59.66 while Royal Bank headed up $2.25, or 5%, to $47.26.
In corporate news, TMX Group says the Commissioner of Competition has "serious concerns" about the likely competitive effects of Maple Group’s proposed plan to buy the owner of the Toronto Stock Exchange. TMX Group says the concerns are about competition in equities trading and clearing and settlement services in Canada. Its shares slipped 32 cents to $44.43.
On the economic calendar, Statistics Canada told us that Real Gross Domestic Product (GDP) hiked 0.9% in the quarter ending in September, after falling 0.1% in the second quarter. The gain was due largely to a jump of 0.3% in consumer spending. On a monthly basis, real GDP by industry increased 0.2% in September.
Elsewhere, the Industrial Product Price Index skidded 0.1% in October, while the Raw Materials Price Index tumbled 1.2%, in both cases due to decreases in the price of metals.
ON BAYSTREET
The TSX Venture Exchange prospered 43.44 points to 1,548.45, while the Nasdaq Canada index added 16.55 points to 404.96
All 14 Toronto subgroups were positive, some substantially so. Metals and mining climbed 8.3%, global base metals took on 7.5% and gold gained 6.1%.
ON WALLSTREET
In New York, investors cheered and raced to scoop up stocks on Wednesday, after the U.S. Federal Reserve said it will work with other central banks to boost liquidity and support the global economy.
The Dow Jones Industrials skyrocketed 490.05 points, or 4.2%, to greet the closing bell at 12,045.70 and charge into positive territory for the year.
The S&P 500 increased 51.77 points, to 1,246.96, while the Nasdaq Composite spiked 104.83 points to 2,620.34
For now at least, investors appear willing to ignore any possible parallels between today and November 2008, and just how precarious the state of financial system might be to warrant such a move by global bankers.
Bank stocks also rallied on news of the central banks' plans and helped investors ignore Tuesday evening's Standard & Poors' downgrade of big bank stocks.
Shares of Goldman Sachs, Morgan Stanley, Citigroup, Jefferies and JPMorgan Chase spiked more than 5%. Bank of America, which hit its 52-week low Tuesday, also moved up 6%.
Shares of American Eagle rose after it released quarterly results before the opening bell.
On Tuesday, American Airlines' parent company, AMR, announced it had filed for Chapter 11 bankruptcy. The company's stock plunged more than 80% during trading Tuesday, but rose more than 44% Wednesday.
Adding to the markets' enthusiasm was more evidence that the U.S. economy could be picking up steam after two better-than-expected reports on private-sector jobs, housing, and Midwest manufacturing.
Economically speaking, a report from Automatic Data Processing showed that private sector employment grew by 206,000 jobs in November. Economists surveyed by Briefing.com expect private sector jobs to have increased by 125,000 for the month of November.
The Chicago Purchasing Managers Index, a report on manufacturing activity in the Midwest, came in well above the level that signals expansion in the sector.
Also Wednesday, the Fed's Beige Book was released illustrating a slow to moderate pace of growth based on economic outlooks from the 12 district banks across the country.
The price on the benchmark 10-year U.S. Treasury plummeted, pushing the yield up to 2.07% from 2.00% late Tuesday. Treasury prices and yields move in opposite directions
Oil for January delivery added 62 cents to $100.41 U.S. a barrel.
Gold futures for December delivery moved up $32.80 to $1,746.00 U.S. an ounce.
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