Stocks up: reports on U.S. service sector, labour ease economic concerns

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market piled on the gains late Wednesday morning as stronger reports on the U.S. service sector and employment boosted optimism about the American economy.

The S&P/TSX composite index climbed 145.7 points to 11,171.6 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.

"They will acknowledge that the economy is getting better but there are risks," said Michael Gregory, senior economist at BMO Capital Markets.

"Inflation is nowhere to be seen so that they will stick to their current policy."

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.

Record high bullion prices had help send the TSX up 148 points on Tuesday, trimming 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 run-up in stocks since March.

Bullion moved further into record high territory on Wednesday, with the December gold contract in New York ahead $7 to US$1,091.90 an ounce and the gold sector rose almost one per cent. Kinross Gold Corp. (TSX: K.TO) moved ahead 48 cents to $19.84.

The Canadian dollar rose 0.57 to 94.19 cents US.

The base metals sector was the leading component, up 3.33 per cent with December copper up five cents to US$3.01. Teck Resources (TSX: TCK-B.TO) was ahead $1.20 to $32.58.

The TSX energy sector was also supportive, up two per cent as the December crude contract on the New York Mercantile Exchange gained $1.05 to US$80.65 a barrel. Suncor Inc. (TSX: SU.TO) gained 70 cents to $35.66.

The financials sector was ahead 1.12 per cent with CIBC (TSX: CM.TO) ahead $1.32 to $63.62.

The TSX Venture Exchange was ahead 10.83 points to 1,337.58.

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 in October. That's down from the 227,000 jobs lost in September and was the seventh straight month of declining job losses. Economists expect the U.S. government's report to show that 175,000 jobs were lost last month.

The Dow Jones industrials advanced 129.3 points to 9,901.2. The Nasdaq composite index climbed 19.74 points to 2,077.06 while the S&P 500 index was up 13.25 points to 1,058.65.

Stocks also advanced despite a disappointing reading on the U.S. service sector, even as the component expanded for a second straight month.

The Institute for Supply Management's services index fell to 50.6 in October from 50.9 in September. Although the index didn't meet forecasts, the ISM said new orders, which are an indicator of future business activity, grew faster.

The TSX also got a lift from Magna International (TSX: MG-A.TO). Its shares climbed $3.28 or 7.6 per cent to $46.28 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 TSX was also supported by some positive earnings reports.

HudBay Minerals Inc. (TSX: HBM.TO) shares climbed $1.12 to $15.54 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.

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 a year earlier. 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 24 cents to $51.55.

Shares in Enbridge Inc. (TSX: ENB.TO) advanced 99 cents to $42.94 after the company more than doubled its profit in the third quarter to $303.8 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 40 cents to $33.27.

Brewer Molson Coors (TSX: TPX-B.TO) (NYSE: TAP-A) says its third-quarter profit rose 37 per cent although revenue fell despite price increases across its major markets. It also credited better cost controls for the increase in profit. In New York, its shares declined $1.80 to US$47.

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 26 cents or 13.68 per cent to $2.16.

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.

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 1.3 per cent, Frankfurt's DAX rose 1.87 per cent while the Paris CAC 40 advanced 2.2 per cent.