Stock markets open higher ahead of Fed announcement on rates, economy

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market moved higher Wednesday morning as commodity prices rose ahead of an afternoon announcement by the U.S. Federal Reserve on interest rates and the central bank's latest appraisal of the economy.

The S&P/TSX composite index climbed 79.8 points to 11,105.7 after a surge in the gold sector on record high bullion prices helped send the main index up 148 points on Tuesday.

The gain trimmed some of the loss of more than five per cent racked up in the previous seven sessions on concerns whether the strength of an economic rebound justifies the sharp runup in stocks since March.

Bullion moved further into record high territory on Wednesday with the December gold contract in New York ahead $6.10 to US$1,091 an ounce and the gold sector rose 0.45 per cent. Kinross Gold Corp. (TSX: K.TO) moved ahead 34 cents to $19.70.

The Canadian dollar rose 0.59 to 94.21 cents US.

On the corporate front, shares in Magna International (TSX: MG-A.TO) climbed $2 to $45 after General Motors Co. said Tuesday it will keep its European Opel unit and restructure it instead of selling a 55 per cent stake to the Canadian auto parts maker and its partner, Russian lender Sberbank. GM CEO Fritz Henderson said that Europe's business environment and GM's overall health have both improved since it put the division up for sale.

The base metals sector was the leading component, up 2.21 per cent with December copper up five cents to US$3.01. Teck Resources (TSX: TCK-B.TO) was ahead $1.07 to $32.45.

The TSX energy sector was also supportive in early trading, up 0.9 per cent as the December crude contract on the New York Mercantile Exchange gained 73 cents to US$80.33 a barrel. Canadian Natural Resources (TSX: CNQ.TO) gained 93 cents to $69.93.

The TSX Venture Exchange was ahead 9.83 points to 1,336.58.

The Fed isn't expected to increase its benchmark interest rate, which is near zero. But, along with an assessment of how the economy is faring, investors will be looking for an indication of how the Fed plans to withdraw its stimulus programs without threatening the recovery.

New York markets were also higher as traders took in some positive employment data two days before the U.S. government releases its October non-farm payrolls report.

The ADP employment report said the U.S. private sector shed 203,000 jobs during October. That's down from the 227,000 jobs lost in September. Economists expect the government's report to show that 175,000 jobs were lost last month.

The Dow Jones industrials advanced 63.8 points to 9,835.7 after slipping 18 points on Tuesday.

The Nasdaq composite index climbed 11.1 points to 2,068.42 while the S&P 500 index was up 7.25 points to 1,052.65.

Investors will also take in a reading on the service sector from the Institute for Supply Management during the morning.

There was plenty of Canadian earnings news to digest.

HudBay Minerals Inc. (TSX: HBM.TO) shares climbed 31 cents to $14.73 after it said Tuesday that it earned $20 million, or 13 cents per share for the quarter ended Sept. 30 compared with a profit of $2.8 million or two cents per share a year ago. Revenue totalled $194.6 million, down from $247.4 million.

Torstar Corp. (TSX: TS-B.TO), the media company that owns the Toronto Star and other newspapers, as well as the Harlequin book-publishing business, reported quarterly net income came in at $4 million or five cents per share. A year ago, the company turned in a loss of $740,000. Revenue fell 12.6 per cent to $221.2 million and its shares fell 26 cents to $7.20.

On Tuesday, Torstar announced a major restructuring at the Toronto Star, which would see employees in all parts of Torstar's flagship newspaper offered voluntary buyouts.

Fertilizer company Agrium Inc. (TSX: AGU.TO) said quarterly net income declined to US$26 million or 16 cents per diluted share in the third quarter, down 92 per cent from $367-million in the third quarter of 2008. The decline was in line with a warning issued by the company on Oct. 23. Revenue slipped to $1.8 billion from $1.9 billion in the third quarter of 2008. Agrium shares gained 49 cents to $51.80.

Shares in Enbridge Inc. (TSX: ENB.TO) advanced 62 cents to $42.57 after the company more than doubled its profit in the third quarter as net income rose to $303.8 million from $148.4 million. The pipeline company increased full-year guidance to a range of $2.30 to $2.36 in adjusted earnings per share.

TransCanada Corp. (TSX: TRP.TO) reported net income fell to $345 million or 50 cents per share in the third quarter, down from $390 million or 67 cents per share in the same period of 2008. Comparable earnings per share fell to 49 cents from 63 cents, which met analyst expectations. Revenue rose to $2.25 billion from $2.14 billion, which beat analyst estimates and its shares improved by eight cents to $32.95.

In other corporate news, oilsands junior Opti Canada Inc. (TSX: OPC.TO), a minority partner in the Long Lake project in northern Alberta, says it is exploring "strategic alternatives," which may include selling assets or the entire company. The operator of Long Lake is Nexen Inc. (TSX: NXY.TO). The two companies had to put production at Long Lake on hold earlier this year due to problems with the project's water treatment equipment. Its shares surged 33 cents or 17.3 per cent to $2.23

Overseas, sentiment in Asia was helped by more optimism about China as the World Bank boosted its forecast for the world's third-largest economy this year from 7.2 per cent to 8.4 per cent, reflecting the country's enormous stimulus measures. The strength of China's rebound also led the Washington-based bank to increase its growth forecast for developing East Asia by 1.3 percentage points to 6.7 per cent.

Japan's Nikkei 225 stock average added 0.4 per cent while Hong Kong's Hang Seng climbed 1.8 per cent.

London's FTSE 100 index gained 1.04 per cent, Frankfurt's DAX rose 1.49 per cent while the Paris CAC 40 advanced two per cent.