TSX closes on 3 1/2-month high

The Toronto stock market closed at a 3-1/2 month high Thursday as commodities gained ground in the wake of positive U.S. housing data and continued hopes that central bankers can keep a fragile recovery on the rails.

The S&P/TSX composite index ran ahead 127.14 points to 12,032.58 while the TSX Venture Exchange climbed 14.63 points to 1,221.25. The TSX hadn’t closed above 12,000 since May 3, when the European government debt crisis worsened as the focus moved to Spain and Italy.

The loonie also closed at its best levels since early May, rising US0.24¢ to US$1.0135 while Statistics Canada reported manufacturing shipments dropped 0.4% in June.

Economists had expected a 0.3% gain, but at the same time the agency revised the May showing to flat from a drop of 0.4%.

U.S. markets were also in the green even as a key measure of manufacturing in the U.S. Northeast came in worse than expected.

The Philadelphia Federal Reserve’s manufacturing index registered a negative reading for a fourth month, coming in at minus 7.1, which was a bit better than July’s reading of minus 12.9. But economists had expected a reading of minus 5.0.

The Dow Jones industrials ran ahead 85.33 points to 13,250.11, the Nasdaq composite index was ahead 31.46 points to 3,062.39, and the S&P 500 index edged up 9.98 points to 1,415.51.

Other data showed that U.S. builders slowed the pace of housing construction slightly in July as construction of singlefamily homes and apartments dipped 1.1% in July compared with June to a seasonally adjusted annual rate of 746,000.

But in a hopeful sign for future construction, building permits increased 6.8% to a seasonally adjusted annual rate of 812,000 in July.

Markets have rallied since the lows of the year in early June on optimism the world’s central banks will do more to shore up the global economy. However, a string of positive U.S. economic data, including a strong reading on retail sales and industrial production, has raised doubts about what the Federal Reserve might do.

While the European Central Bank is expected to restart its bond-buying program to keep a lid on the borrowing rates of Spain and Italy, the U.S. and Chinese monetary authorities are widely tipped to back more easing measures to boost their economies.

Chinese Premier Wen Jiabao, during a visit to eastern China earlier this week, was quoted by the official Xinhua news agency as saying the country has the “conditions and capabilities” to meet its 7.5% economic growth target this year.