bargain hunters Drive up market
The Toronto stock market advanced smartly for a second session Wednesday as traders continued to pick up stocks that have been beaten down amid concern about the potential global impact of the European Union’s drawn- out debt crisis.
The S& P/ TSX composite index was off early highs but still up 125.69 points, to 11,633.40, at mid- afternoon on top of a 172point surge Tuesday. The index had been up as much as 179 points Wednesday morning but gains eroded as the gold sector turned sharply lower, even as bullion closed at a one- month high. The TSX Venture Exchange was up 17.07 points, to 1,302.64.
Buyers moved in following a drop of almost 2% last week that left the market down about 10% from the highs of 2012 in late February. “It’s a relief rally,” said John Stephenson, portfolio manager at First Asset Funds. “Many people have been sitting on the sidelines, waiting for an opportunity to get in. And hope springs eternal.”
The Canadian dollar was up US0.95¢ to US97.29¢ as traders waded into riskier assets such as equities, commodities and resource- based currencies.
Gains were also supported mid- afternoon with the release of the U. S. Federal Reserve’s latest regional survey on the economy. The Fed’s so- called Beige Book found that the U. S. economy grew moderately in most regions of the country this spring and companies kept hiring. This was a hopeful sign after a spate of gloomy data released last week, including a huge miss in expectations for job creation during May.
New York’s Dow Jones industrials surged 286.84 points, to 12414.79. The Nasdaq composite index gained 66.61 points, to 2,844.72, and the S& P 500 index was ahead 29.63 points, to 1,315.13
The European Central Bank said earlier in the day that it was keeping its key rate unchanged at 1%. That had been expected. But there had been hopes ECB president Mario Draghi would also indicate the bank is prepared to cut the rate next month to stimulate a weakening eurozone economy and, at the same time, approve more stimulus measures in an effort to spur governments to take action themselves.
But Draghi has said the central bank cannot make up for inaction by governments. Analysts say the bank is now likely to see what European leaders can come up with at a summit at the end of this month. This could include moves toward stronger oversight of banks, help for Spain and its troubled banks, or proposals for more growth or shared government borrowing.
There are also hopes that the U. S. Federal Reserve might provide more stimulus to its economy, supporting confidence in the global economy.