The Toronto stock market registered a solid gain Thursday after China reassured markets that it has no plan to sell euro-zone bonds, but the TSX was somewhat hobbled by financials after a trio of big banks turned in earnings disappointments.
The S&P/TSX composite index jumped 205.22 points, or 1.8%, to end the session at 11,749.12, after China denied a Financial Times report Wednesday that it was reviewing its European investments that had earlier helped erase strong advances on North American markets.
China’s State Administration of Foreign Exchange, which rarely comments on its activities, said talk of a review was "groundless" and stressed that the European market "in the past, present and future always will be one of (its) the major investment markets."
Such a move to get out of euro-zone debt would have signaled China’s lack of confidence that Europe can contain a government debt crisis that has depressed markets for weeks and taken big chunks from resource stocks, which make up a large part of the TSX.
The financial sector was the only negative one on the TSX after Royal Bank of Canada, Toronto-Dominion and CIBC all improved profits dramatically but fell short of analyst estimates on key metrics.
The Chinese agency’s announcement Thursday also had a positive effect on the Canadian dollar.
At the TSX, the financial sector was flat as Royal Bank of Canada handed in a $1.3-billion profit in its second quarter, much better than the $50-million loss it reported a year ago, but below analyst estimates. The bank’s net income amounted to 88 cents per share and cash EPS was 96 cents per share, well below the $1.08 that analysts had expected. RBC shares fell $2.62 to $56.85.
CIBC had $660 million in net income for its fiscal second quarter. That compared with a $51-million loss reported by the bank in the comparable period last year. Excluding certain items, the company earned $1.46 per share, compared with analysts’ average estimate of $1.50 per share. CIBC shares shed $3.27 to $72.02.
TD Bank Financial Group more than doubled its second-quarter profit. Net income was nearly $1.2 billion, before adjustments, up from $545 million a year earlier. Excluding one-time items, the bank said adjusted income came in at $1.36 a share, two cents below analyst expectations.
However, provisions for credit losses fell to $365 million in the quarter from $772 million a year earlier and capital markets revenue came in above some analyst expectations. TD shares added 58 cents to $73.38.
National Bank also reports quarterly earnings Thursday and its shares dipped 94 cents to $58.07.
The financial sector had taken on a more positive tone on Wednesday after Bank of Montreal beat earnings expectations as their profit doubled from a year ago to $745 million. BMO shares were up again Thursday, rising $2.04 to $62.30.
The TSX found wide support from oil and mining stocks as most commodity prices rose sharply following the reassuring comments from China.
The TSX energy sector was ahead, as Suncor Energy gained $1.68 to $32.37, while Imperial Oil was up $1.44 at $40.89.
The base metals sector rose as the July copper contract on the Nymex rose seven cents to $3.15 U.S. a pound. Teck Resources was up $2.27 to $36.79 while FNX Mining rose 47 cents to $12.37.
The gold sector was higher as Kinross Gold Corp. rose 18 cents to $18.20 while Goldcorp Inc. advanced 17 cents to $45.52.
Shares in Canadian insurers were sharply higher Thursday with Sun Life ahead $1.63 to $29.88 and Manulife Financial gained $1.10 to $17.69.
Shares in Viterra Inc. climbed six cents to $7.70 after the agricultural products company agreed to buy 21st Century Grain Processing, a U.S.-based processor of oats, wheat and custom-coated grains for $90.5 million U.S. in cash.
In other corporate news, Finance Minister Jim Flaherty said federal regulations will be tightened to ban Canadian banks from using their websites to promote insurance that can’t be sold through their regular branch offices.
In economic news, Statistics Canada said Canadian corporations earned $62.9 billion in operating profits in the first quarter, up 4.8% or $2.9 billion from the previous quarter, marking the third consecutive quarter of growth.
The Canadian dollar tacked on 1.84 cents to 95.38 cents U.S.
ON BAYSTREET
All but one of the 14 TSX subgroups were higher. Global base metals surged 6.4%, followed by a 5.9% climb by metals and mining, and a 4.2% jump by energy stocks.
Financial faded but 0.01%, the only group to miss the party.
The TSX Venture Exchange was up 34.36 points to 1,504.04, while the Nasdaq Canada index moved 26.66 points higher to 699.31
ON WALLSTREET
In New York, stocks soared Thursday, with the major indexes gaining about 3%, after Chinese officials dismissed reports that they're reviewing their nation's investment in European bonds amid concerns about the continent's debt problems.
The Dow Jones industrial average soared 284.54 points, or 2.9%, to 10,258.99
The S&P 500 index gained 35.11 points to 1,103.06. The Nasdaq composite index leaped 81.80 points to 2,277.68.
Stocks erased gains in the last hour of trade Wednesday, with the Dow finishing below 10,000 for the first time in three months, as the focus shifted from strong economic reports to lingering concerns about global economic recovery and the weakening euro.
But investors' confidence got a boost Thursday after China's State Administration of Foreign Exchange refuted reports that the country was reconsidering its holdings in European bonds, calling the claims "groundless."
China holds $2.45 trillion U.S. of foreign exchange reserves, with U.S. Treasury debt and euro-zone government bonds making up key investments.
Johnson & Johnson executives told lawmakers that the widespread recall of children's Tylenol medicines earlier this month was a precautionary measure taken against "remote" health risks.
But the U.S. Food and Drug Administration is investigating reports of at least 775 serious side effects from the recalled drugs.
Johnson & Johnson's stock was the only Dow component to slip into the red Thursday, falling 0.2%. Since the May 1 recall, the company's shares have slipped more than 7%.
BP executives also took the hot seat on Capitol Hill in ongoing testimony about the Gulf oil spill. The company's shares soared 7% after an Oppenheimer analyst raised the stock's rating, saying that the recent selloff has gone too far. Shares of BP have dipped 30% since the April 20 explosion.
Apple's market capitalization overtook Microsoft's for the first time in 20 years at the close Wednesday, making it the second most valuable company in the nation after Exxon Mobil. Both tech giants added about 4%.
Economically speaking, the government's revised reading on first-quarter gross domestic product (GDP) came in at an annual rate of 3%, below expectations of 3.3%. The first reading, released last month, was 3.2%.
The Department of Labor said filings for first-time unemployment insurance fell last week to 460,000 from 474,000 the previous week. Economists were expecting claims to fall to 455,000.
Treasury prices staggered, raising the yield on the 10-year note to 3.34% from 3.22% Wednesday. Treasury prices and yields move in opposite directions.
The price of a barrel of oil picked up $3.26 to $74.77 U.S.
Gold prices eased one dollar to $1,214 U.S. an ounce
