The Toronto stock market surged more than 200 points mid-morning Monday amid higher commodity prices and data showing the economy contracted less than expected in the first quarter.
Positive economic data supported New York markets even as General Motors Corp. (GM-N0.880.1317.33%) filed for bankruptcy protection in the United States.
Surging energy and mining stocks helped send Toronto's S&P/TSX composite index up 234.8 points to 10,604.9.
The main index ran up 3.7 per cent last week on higher commodity prices – particularly oil (OILC-I67.581.271.92%) – and bank earnings that beat expectations.
Statistics Canada said that gross domestic product declined 1.4 per cent in the first quarter, the largest quarterly decrease since 1991. GDP contracted at an annualized rate of 5.4 per cent in the first quarter, much better than the 6.5 per cent reading that had been generally expected.
Some were calling for a nine per cent drop at one stage, and the Bank of Canada looked for minus 7.3 per cent.” observed BMO Capital Markets deputy chief economist Doug Porter.
“Indeed, among the G-7, only France posted a smaller contraction in Q1 than Canada. But most importantly, there are a number of compelling reasons to firmly believe that conditions have strengthened substantially from those dark days early this year.”
Continued weakness in the U.S. dollar continued to push the Canadian dollar higher. The loonie was up 0.75 to 92.35 cents US after surging almost eight cents during May.
The TSX Venture Exchange climbed 9.44 points to 1,133.52.
New York's Dow Jones industrial average (DJIA-I8,711.48211.152.48%) ran up 188.9 points to 8,689.2 as GM's filing was widely expected. The automaker's stock, which has plunged in anticipation of the restructuring, was removed from the 30-stock average on Monday.
The plan is for the U.S. government to take a 60 per cent ownership stake in the new GM. The Canadian government would take a 11.7 per cent stake, with the United Auto Workers getting a 17.5-per-cent stake and unsecured bondholders receiving 10 per cent.
Existing GM shareholders are expected to be wiped out.
The Nasdaq composite index (COMP-I1,823.9849.652.80%) gained 47.52 points to 1,821.85 while the S&P 500 index added 23 points to 942.15.
The Institute for Supply Management says its index on manufacturing came in at 42.8 – its highest level since September – compared with 40.1 in March. A reading below 50 still indicates contraction.
Analysts had expected the index to read 42 for May.
The market was also supported by a report showing a smaller-than-expected dip in consumer spending.
The U.S. Commerce Department says consumers trimmed their spending in April by 0.1 per cent, slightly less than the 0.2 per cent reduction forecast by economists. Meanwhile, wages and salaries were flat in April. Personal income was expected to decline by 0.2 per cent.
Investors are awaiting an influential U.S. manufacturing survey later Monday morning.
Analysts expect the Institute for Supply Management to report that its purchasing managers' index rose to 42.0 in May from 40.1 in April. Anything below 50 indicates contraction, but the reports in Europe and Asia are fuelling hopes of an even bigger increase than analysts are forecasting.
The Toronto energy sector rose four per cent as the July crude contract on the New York Mercantile Exchange was up $1.29 to $67.60 (U.S.) a barrel.
The base metals sector in Toronto rose more than six per cent as the price of copper on the Nymex rose nine cents to $2.29 a pound. Financials continued to head higher in the wake of last week's earnings reports. The gold sector was the only declining sector, down 0.75 per cent as the August bullion contract in New York rose $1.40 to US$981.70.
Overseas markets were higher following surveys in Europe and Asia that showed the manufacturing sector is healing.
Japan's Nikkei stock average jumped 1.6 per cent, while Hong Kong's Hang Seng index soared 4.0 per cent.
In China, brokerage CLSA Asia-Pacific Markets said its monthly purchasing managers index rose to 51.2 in May from April's 50.1 on a 100-point scale. Numbers above 50 show an expansion in manufacturing.
In European trading, Britain's FTSE 100 was up two per cent, while Germany's DAX index rose 3.65 per cent and France's CAC-40 gained 3.25 per cent.
