The Toronto Stock Exchange inched higher at midday Monday as commodities were buoyed by improved sentiment about the global growth story and a dividend announcement at corporate behemoth Apple Inc.
The S&P/TSX composite index added 7.6 points to 12,504.62. The junior TSX Venture Exchange, however, shed 6.36 points to 1,599.81.
The Canadian dollar was up 0.24 of a cent to 101.06 cents US.
April oil prices rose 62 cents to US$107.68 a barrel, while gold prices gained US$7 to US$1,662.90 an ounce. Copper prices added three cents to US$3.91 per pound.
Commodity prices moved higher on improved confidence that the world economy is improving—which would mean an increase in demand for resources—as fears of European debt fade slightly and signals point toward a rebound in the U.S. economy.
“The market for some time has been baking in a pretty dire scenario in Europe,” said Canadian market analyst Craig Fehr at Edward Jones.
“I don’t think there’s been full acknowledgment, or at least the market hasn’t been willing to fully embrace yet the idea that the U.S. economy is improving,” Fehr said.
“You start to add up a few of these things and you get a global growth story that looks like it might be getting a bit of steam and that really is what’s going to drive commodity prices longer term, when you think about the consumption that’s going to occur in China, how much consumption comes out of the U.S. when that economy is growing.”
Higher commodity prices sent the energy sector on the TSX higher, with shares in Suncor Energy up 42 cents to C$33.34. The mining sector also gained, with shares in Teck Resources up 20 cents to $36.77.
However, a spike in oil prices, amplified by tensions in oil-rich Iran, is a double-edged sword for the economy as higher prices at the pump mean consumers have fewer disposable dollars to spend on other goods, Fehr noted.
Meanwhile, a relatively slow week for economic news started off with a big announcement from the corporate world, as Apple Inc. said it would pay a dividend for the first time since 1995.
Not only is that good news for Apple shareholders, Fehr said, but also it is a “symbol of something much bigger” in that corporations flush with cash may start deploying capital.
Apple introduced a quarterly dividend of $2.65 per share and started a $10-billion share buyback program. Shares added 1% to$591.56. Apple is sitting on $97.6 billion in cash and securities.
For years, it has resisted calls to reward shareholders with some of that money. Since the death of CEO Steve Jobs, management has signalled that it’s been considering options for the money.
“It’s good for Apple shareholders but … it’s a better reflection of what the broad market is experiencing right now and investors have a great opportunity to get into quality companies with rising payouts,” Fehr said.
Wall Street markets were mixed, with the Dow Jones industrial index down 15.36 points to 13,217.26, the Nasdaq up 9.05 points to 3,057.32 and the broader S&P 500 adding 1.43 points to 1,406.6.
Statistics Canada reported Monday morning that wholesale sales slipped 1% in January to $49 billion, largely because of lower sales of motor vehicles and parts. The agency said it was the second decrease in three months after a general upward trend that began last May.
In an otherwise quiet week for economic data, investors will look to Canadian retail sales numbers for January coming out Thursday and February’s Consumer Price Index on Friday.
Traders will also take in the latest reports on U.S. housing starts and sales figures for new and existing homes later in the week.
Economists expect housing starts rose by 0.3% last month, while existing home sales gained 0.7% and new home sales climbed by 1.4%.
On Monday, data showed homebuilders’ feelings about the current U.S. housing market haven’t changed from February. But many are growing more optimistic that sales could pick up in the coming months.
The National Association of Home Builders/Wells Fargo says its builder sentiment index was unchanged this month at 28, the highest level since June 2007. The flat reading followed five straight increases. But builders said they are more hopeful about sales over the next six months.
In Canadian corporate news, trading in shares of grain handler Viterra Inc. was halted on the Toronto Stock Exchange as the company weighs potential takeover offers.
Viterra confirmed last week that potential bidders have come forward with offers to buy the company. It acknowledged at the time that any bidders would likely have to offer at least $16 per share, but warned it could make no assurance of a deal or what price might be offered. Its shares closed Friday at $16.21.
A deal involving Ivanhoe Energy and Ivanhoe Capital Finance Ltd. to amend a loan agreement could see company co-chairman Robert Friedland increase his stake in Ivanhoe Energy to 17.95% from 15.49%. It gives Friedland the right to convert each 96 cents of outstanding loan principal into one common share. Ivanhoe stock was unchanged at 95 cents a share.
Meanwhile, debt-loaded Greece recently qualified for a second multibillion-dollar bailout after its private creditors took significant losses on their bond holdings to avoid losing even more money in a Greek bankruptcy. Now, new doubts are emerging about whether Greece will be able to deliver on austerity promises that were part of the bailout deal.
Britain’s FTSE 100 fell 0.08%. Germany’s DAX dropped 0.3% and France’s CAC-40 lost 0.7%.
In Asia, Hong Kong’s Hang Seng Index fell 1% to 21,115.29 as falling home prices in China and its weak trade in the first two months of 2012 kept investor verve in check.
Further evidence from the U.S. last week that its economic recovery is gaining strength buoyed stocks elsewhere in Asia. The U.S. is a crucial market for the region’s exporters.
