GB: TSX up as Greece secures bailout deal, China moves to encourage growth
TORONTO - The Toronto stock market found lift from the resource sector Tuesday as prices for oil and other commodities rose amid moves by China to encourage economic growth.
But response to an agreement to lend Greece €130 billion to avoid a debt default was muted on global equity markets.
The S&P/TSX composite index ran ahead 67.33 points to 12,525.62 as traders also took in major acquisition activity, while the TSX Venture Exchange jumped 14.42 points to 1,672.57.
Calgary-based oil and gas contractor Flint Energy Services Ltd. (TSX:FES) said Monday it is being bought by U.S. engineering and construction giant URS Corp. for $1.25 billion in cash, a 68 per cent premium to Flint's closing price Friday on the TSX. The deal reflects booming growth in Alberta's oilsands and North American shale gas and its shares jumped $9.88 to $24.78.
And on Tuesday, Newfoundland-based power company Fortis Inc. (TSX:FTS) said it is buying New York state utility CH Energy Group Inc. in a cash and debt deal worth US$1.5 billion. Fortis shares dipped six cents to $32.79.
The Canadian dollar was down 0.32 of a cent to 100.45 cents US after Greece on Monday finally secured its second massive bailout in less than two years.
Traders preferred the safe haven status of U.S. Treasuries on the realization that there are many hurdles still to be cleared and Greece remains burdened with massive amounts of debt even after its private creditors agreed to a huge writedown of debt. The prevailing view in the markets is that Greece remains insolvent and that its debt crisis still has a few more chapters to run.
"Unfortunately, despite this agreement that was a long time coming, it doesn't feel like everything is onward and upward," said BMO Capital Markets senior economist Jennifer Lee.
U.S. markets also advanced with the Dow Jones industrial average up 8.78 points to 12,958.65.
The Nasdaq composite index was ahead 3.61 points to 2,955.39 and the S&P 500 index rose 2.38 points to 1,363.61.
Commodity prices advanced after China's central bank moved over the weekend to cut banks' reserve ratios to encourage lending. The People’s Bank of China said that it will reduce the proportion of cash that banks must set aside by half a percentage point to 20.5 per cent from Feb. 24.
The bank had moved repeatedly over the last couple of years to tighten lending requirements in order to slow the economy to get a grip on high inflation.
Prices for oil and metals advanced as the March crude contract on the New York Mercantile Exchange gained $1.40 to US$104.64 a barrel. Suncor Energy (TSX:SU) was up 58 cents to $34.72.
Other energy service companies advanced in the wake of the Flint Energy deal with Precision Drilling (TSX:PD) ahead 20 cents to $11.93.
Crude prices also rose as Iran laid out conditions for future oil exports to European countries after halting sales to Britain and France earlier this week in retaliation for an EU embargo over Tehran’s controversial nuclear program that is to go into effect in July. Foreign Ministry spokesman Ramin Mehmanparast said Tuesday that Iran seeks guarantees of payments, long term contracts and a ban on unilateral cancellation of contracts by buyers.
Tehran said Monday it was considering extending the oil embargo to other European countries.
The base metals sector climbed 1.45 per cent as metal prices also climbed with the March copper contract up 10 cents to US$3.81 a pound. China is the world's biggest consumer of the metal, which is known as an economic barometer because it is used in so many businesses. Teck Resources (TSX:TCK.B) gained 51 cents to $38.81.
April bullion was ahead $20.40 to US$1,746.30 an ounce and the gold sector jumped 1.5 per cent. Barrick Gold Corp. (TSX:ABX) was ahead 66 cents to $47.49.
On the economic calendar, Statistics Canada said retail sales edged down 0.2 per cent in December to $38.6 billion, following four consecutive monthly increases.
The agency also reported that wholesale trade rose 0.9 per cent in December to $49.6 billion, the seventh increase in the last eight months of the year.
Meanwhile, the feeling that the Greek deal merely buys time pushed European bourses lower.
London's FTSE 100 index lost 0.26 per cent, Frankfurt's DAX fell 0.64 per cent and the Paris CAC 40 was down 0.47 per cent.
Earlier, Japan's Nikkei 225 index closed down 0.2 per cent while Hong Kong's Hang Seng rose 0.3 per cent.
Traders also took in major earnings news from the U.S.
Wal-Mart Stores Inc. reported a 4.2 per cent decline in fourth-quarter profits to US$5.16 billion or $1.50 a share. Net sales rose 5.9 per cent to $122.28 billion. Its shares fell 5.2 per cent to US$59.83.
Home Depot Inc.'s fiscal fourth-quarter net income rose 32 per cent to US$774 million or 50 cents a share. Quarterly revenue increased six per cent to $16.01 billion and its shares gained two per cent.
In other corporate news, Research In Motion (TSX:RIM) has released new operating software BlackBerry PlayBook OS 2.0 for download. The Waterloo, Ont.,-based company says the new operating system enhances communications and productivity and offers expanded application and content support. RIM shares gained 12 cents to $15.14.
Natural gas engine technology maker Westport Innovations Inc. (TSX:WPT) has changed a joint venture with Cummins Inc. to refocus on what could be strong growth in the North American market. The Vancouver company said Monday the Cummins Westport venture will narrow its focus on developing new fuel-efficient engines for North American customers. Westport shares advanced $1.04 to $45.70.
