TSX riSeS 0n China reformS, fed eaSing

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 US0.19¢ to US95.72¢ amid strong manufacturing data for September.

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

U.S. indexes were higher with the Dow Jones industrial average ahead 85.48 points to 15,961.70, Nasdaq up 13.23 points at 3,985.97 and the S&P 500 index 7.56 points 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$85billion of monthly bond purchases until at least March.

But it could come earlier depending on economic performance so every data point will be scrutinized 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, it 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, telecommunications and finance.

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.

Most TSX sectors were positive and the energy sector led advancers, up 1% as December crude edged up US8¢ to US$93.84 a barrel. The telecom sector rose 0.85% and financials also lifted the TSX with a 0.4% rise.

The gold sector was the biggest decliner, down about 1.65% even as December bullion closed up US$1.10 to US$1,287.40 an ounce.