MARKETS JUMP ON STIMULUS PLANS
• North American markets rose Friday after the European and Chinese central banks signalled new efforts to boost growth through monetary policy.
The Toronto Stock Exchange’s S&P/ TSX composite index ended the day up 75.55 points at 13,953.66, helped by a rebound in the share price of embattled Valeant Pharmaceutical International Inc.
Canada’s largest drugmaker had seen its stock slide by 37 per cent over the past four days amid a storm of criticism around its business practices, but gained back $8.64, or six per cent, on Friday.
Steve Belisle, portfolio manager at Manulife Asset Management, said Valeant and another Canadian pharmaceutical, Concordia Healthcare Corp., had both been oversold because of perceived political risk in the big U.S. market for drugmakers seeking to increase revenue through substantial price increases.
“They were pushed down way too much and a more rational price is actually higher than where they are,” he said.
While earnings growth in the sector has been driven over the last two years by mergers and acquisitions, that activity looks to be far less likely now that the industry is under a microscope among U.S. politicians, he said.
The Dow Jones average of 30 stocks closed up 157.54 points at 17,646.70, the broader S&P 500 index advanced 22.64 points to 2,075.15 and the Nasdaq gained 111.81 points to 5,031.86.
Stocks rallied for a second day in Europe in anticipation of moves by the European Central Bank to inject more financial support into Europe’s ailing economy. ECB head Mario Draghi indicated Thursday that the bank could consider providing more stimulus at its meeting in December.
Germany’s DAX gained 2.9 per cent, while France’s CAC 40 rose 2.5 per cent and Britain’s FTSE 100 climbed 1.1 per cent.
On Friday the Chinese central bank took steps to boost lending and stimulate its economy, cutting interest rates for the sixth time in less than a year and reducing the amount of money banks must keep on hand as a reserve fund.
“Monetary policy is overly restrictive in many countries around the world, including China, so I think they will continue to get looser on their monetary policy, more stimulative on their monetary policy, over the next few months,” Belisle said.
On commodity markets, gold futures fell $3.30 to $1,163.30 US an ounce, light crude fell 78 cents to $44.60 US a barrel and natural gas dropped 10 cents to $2.29 US per thousand cubic feet.
Belisle said commodity prices should rise as central banks get more assertive in pursuing policies aimed at boosting the local economy. “If that stimulus in China and around the world plays out, that’s generally good for commodities,” he said.
The loonie ended the day down 0.4 of a U.S. cent at 75.90 cents US.