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TSX makes strides midday Friday as traders cheered by eurozone deal

The TMX Broadcast Centre's monitors are shown in Toronto on May 16, 2011. THE CANADIAN PRESS/Frank Gunn
June 29, 2012 - 12:09 PM

TORONTO - The TSX enjoyed a triple-digit bounce at midday Friday as commodity prices rebounded amid improved investor sentiment over a surprising move by European leaders to take aggressive steps toward solving their debt crisis.

The S&P/TSX composite index moved ahead 133.61 points to 11,558.31. The TSX Venture Exchange added 18.23 points to 1,182.70.

The Canadian dollar jumped 1.27 cents to 98.09 cents US as traders appeared more willing to invest in assets considered riskier such as the commodity-tied loonie.

Wall Street was also buoyed by the news. The Dow Jones added 214.86 points to 12,817.12 and the S&P 500 was up 24.52 points at 1,353.56, while the Nasdaq gained 64.91 points to 2,914.40.

In the run-up to the meeting in Europe, investors had expected the summit — like so many gatherings before it — would not produce a solution powerful enough to restore the confidence of markets.

But leaders in Brussels on Friday revealed a new plan that allows Europe's bailout fund to give money directly to a country's banks, without imposing strict austerity conditions on the government.

They also agreed to ease austerity measures that have been causing political unrest and agonizing recessions in Greece and other countries that have received bailouts.

“The agreement is solid step in the right direction for Europe," said Benjamin Reitzes, senior economist at BMO Capital Markets.

"(But) Markets tend to lose patience quickly and these measures may not be enough to contain worries for the next six months. Clearly more steps need to be taken," said Reitzes, noting that "Eurobonds weren’t even mentioned in the statement."

Still, he said Europe's moves were "positive steps (that) should be recognized for what they are … solid progress."

The two-day summit in Brussels is the 19th meeting for European leaders since the debt crisis emerged and leaders have repeatedly clashed over how best to address it. European Council President Herman Van Rompuy called Friday's agreement a "breakthrough."

The August crude contract moved up $4.61 to US$82.30 a barrel on the New York Mercantile Exchange on the theory that a cure to Europe's debt woes will remove one of the major drags on global growth.

The energy index was up 2.5 per cent on the TSX, with shares in Suncor Energy (TSX:SU) up 3.4 per cent or 95 cents to C$29.25.

The August gold contract gained $48.50 to US$1,598.90 an ounce, while the July copper contract moved up 14 cents to US$3.47 a pound. The mining index led the way higher, up 3.4 per cent with shares in Teck Resources (TSX:TCK.B) ahead 2.3 per cent or 71 cents at C$30.98.

While rising commodity stocks buoyed the TSX, Research In Motion (TSX:RIM) was a weight, though the already eroded valuation of the company means it doesn't have the market heft it once did. Still, it helped send the information technology sector well into the red, down 3.9 per cent.

The BlackBerry maker reported dismal earnings results after the close of markets on Thursday, with an adjusted loss of 37 cents per share that widely missed the three cent per share loss analysts had expected. It also announced another delay to the launch of its new smartphones.

The Waterloo, Ont.,-based company also said it would lay off a third of its workforce — or about 5,000 employees — to contain costs as it pushes ahead with a complete revamp of the BlackBerry operating system. Shares in RIM fell 20 per cent or $1.94 to $7.52 in midday trading.

Canada's economy had a second consecutive month of growth in April, building momentum with a 0.3 per cent increase in gross domestic product compared with March, Statistics Canada reported Friday.

Canada's economy took a step backwards in February — when output was affected by a number of production shutdowns — but resumed growth in March, when the GDP advanced by 0.1 per cent.

Also on Friday, the Conference Board of Canada said that its help-wanted index gained 1.1 percentage points in May. That continued an upward trend that began late last year, but one that has weakened recently, partly due to a sizable decline in the index in March.

Meanwhile, the U.S. Commerce Department said Friday that American consumer spending showed no gain in May, the weakest monthly figure since spending was similarly unchanged in November.

In Canadian corporate news, Canadian Pacific Railway (TSX:CP) named Hunter Harrison as its new president and chief executive officer, the result of changes pushed through by the company's largest shareholder. Harrison's appointment was widely expected after a high-profile battle waged against the Calgary-based railway's former leadership by William Ackman, head of a New York-based investment fund. Shares added 91 cents to $74.43.

A consortium that includes Bombardier Transportation has received the green light to supply an additional 210 rail cars worth US$1.3 billion to the Greater Paris commuter network. As a consortium member responsible for a third or the order, the Berlin-based division of Quebec's Bombardier Inc. (TSX:BBD.B) will realize US$417 million from the order, the company said Friday. Bombardier shares gained five cents to $4.03.

News from © The Canadian Press, 2012
The Canadian Press

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