TSX advances amid optimism regarding eurozone
Published Friday, July 27, 2012 9:28AM EDT
Last Updated Friday, July 27, 2012 3:01PM EDT
TORONTO -- The Toronto stock market was higher Friday as stocks continued to find lift from the latest round of optimism that the eurozone debt crisis is under control.
The S&P/TSX composite index gained 76.01 points to 11,715.76 amid a reminder of weakening American economic growth and disappointing earnings reports from the resource sector.
The TSX Venture Exchange climbed 5.05 points to 1,186.46.
Markets have rallied strongly since the European Central Bank president pledged Thursday to do whatever it takes to save the euro currency union.
ECB President Mario Draghi suggested that the central bank could intervene in markets to lower the borrowing rates of financially weak countries like Spain.
"At the end of the day, the only institution that is critical to resolving the issue is the European Central Bank," said Patrick Blais, managing director and portfolio manager at MFC Global Investment Management.
"They're the only institution with the capacity and the ability to at the end of the day monetize part of the debt."
The Canadian dollar rose 0.36 of a cent to 99.41 cents US amid rising prices for oil and metals.
New York markets were sharply higher despite data showing economic growth slowed during the second quarter to its lowest pace in a year. Gross domestic product rose 1.5 per cent, which was roughly in line with expectations. That's down from a revised two per cent gain in the first quarter. But the data raised expectations that the U.S. Federal Reserve will indicate next week that another round of economic stimulus is in the works.
The Dow Jones industrials gained 92.59 points to 12,980.52.
The Nasdaq composite index was ahead 31.53 points to 2,924.78 and the S&P 500 index climbed 13.92 points to 1,373.94.
Stocks have been depressed in recent weeks as the focus of the European government debt crisis moved to Spain. Traders skeptical over the government's ability to manage high debt levels have driven up bond yields past the seven per cent level, which is considered unsustainable in the long run.
Draghi suggested that the ECB considers it part of its job to keep government borrowing rates at normal levels. It could do so by buying government bonds, which has the effect of lowering their yield, or interest rate.
The financial sector led TSX advancers with Sun Life Financial (TSX:SLF) ahead 49 cents to $21.36.
Shares in insurance and investment giant Fairfax Financial Holdings Ltd. (TSX:FFH) shed $6.78 to $373.22 after it said quarterly profit rose 14 per cent, largely due to improved underwriting results and a jump in revenues from premiums written by its insurance and reinsurance businesses.
Commodity prices advanced with the September crude contract on the New York Mercantile Exchange ahead 64 cents to US$90.03 a barrel.
The energy sector rose 1.4 per cent as Imperial Oil (TSX:IMO) moved ahead 62 cents to $43.39.
The metals and mining group turned positive, up almost one per cent while September copper ran ahead three cents to US$3.43 a pound. First Quantum Minerals (TSX:FM) improved by 48 cents to $18.55.
The gold sector was the biggest decliner, down 0.16 per cent while August gold gained $1.90 to US$1,617 an ounce. Barrick Gold (TSX:ABX) continued to lose ground after issuing a disappointing earnings report Thursday, down 63 cents to $32.41.
Eldorado Gold (TSX:ELD) gained 22 cents to $10.74 after it reported quarterly net income of $46.6 million or seven cents share. That is down 38 per cent from a year ago. Revenues from gold sales for the quarter came in at $214.2 million, down 13 per cent from a year earlier.
Eldorado also revised its 2012 production guidance downward to 660,000 ounces of gold from a previous estimate of 730,000 to 775,000 ounces due to delays at its Efemcukuru project in Turkey and at Eastern Dragon in China.
Elsewhere on the earnings front, Facebook shares plunged 13.47 per cent to US$23.23 after the social networking site reported stronger-than-expected revenue and a gain in user numbers Thursday. But investors weren't impressed with the fact that growth has slowed. Also, Facebook didn't offer an outlook for the rest of the year.
In Canada, TransCanada Corp. (TSX:TRP) posted second-quarter net income attributable to common shares of $272 million or 39 cents per share, down from $353 million or 50 cents per common shares in the same period last year. Revenue came in at $1.8 billion compared to $1.79 billion year over year.
TransCanada also said it has won final approval on three permits needed to build an oil pipeline to refineries on the Texas coast. Its shares inched up a penny to $44.81.
Shares in Cameco (TSX:CCO) were down 78 cents to $21.86 after the uranium miner reported an 85 per cent drop in quarterly earnings to $8 million, or two cents per share. Revenue came in at $391 million for the quarter, down from $426 million year over year. The company cites lower earnings from its uranium business based on lower sales volumes, lower realized prices and higher costs.
Starbucks dropped $5.80 or 11.08 per cent to US$46.60 after the coffee retailer reported Thursday that net income in its fiscal third quarter rose 19 per cent from a year ago. But analysts expected more, and were further disappointed when the company cut its outlook for the current quarter because of a recent slowdown in U.S. customer traffic and persisting challenges in hard-hit European regions.
European bourses advanced with London's FTSE 100 index up 0.84 per cent, Frankfurt's DAX added 1.25 per cent and the Paris CAC 40 climbed 2.2 per cent.