Stocks open higher on hopes for economic recovery; US$ weakness boosts C$, gold

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(The Canadian Press)

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market opened sharply higher Tuesday following a weekend pledge by the world's 20 biggest economies to support the global recovery with stimulus efforts.

The S&P/TSX composite index moved 131.6 points higher to 11,149.1 after finishing flat last week amid a series of volatile trading sessions as investors dealt with a new round of worries connected to the pace of a economic recovery.

The TSX was supported in particular by rising commodity stocks as continuing weakness in the American dollar helped send oil and metals prices higher.

The faltering greenback also gave a big lift to the Canadian dollar, rising 1.39 cents to 93.41 cents US.

"Part of it is we are entering global economic recovery, the G20 indicated on the weekend they're going to leave stimulus efforts in place, so that has some people thinking, if that's going to remain in place we'll continue to see these improving economic numbers globally and (that) is bearish for other currencies," said David Watt, senior currency analyst at RBC Capital Markets.

"And that sentiment benefits the Australian dollar, the Canadian dollar, ones that are linked to commodities... and on top of that the fiscal situation in the United States - this gives the (U.S.) dollar another leg downward."

The TSX energy sector was up two per cent with the October crude contract on the New York Mercantile Exchange ahead $2.45 to US$70.47 a barrel. EnCana Corp. (TSX: ECA.TO) moved up $1.13 to $56.98.

The gold sector per cent as the December bullion contract ran up $10.70 to US$1,007.40 an ounce. Goldcorp Inc. (TSX: G.TO) advanced $1.48 to $46.43.

Iamgold Corp. (TSX: IMG.TO) shares jumped 85 cents to $15.88 after it said it plans to increase gold production during the initial years of operation at its Essakane project in Burkina Faso, West Africa.

The TSX Venture Exchange climbed 1,243.68.

New York markets also advanced as investors took in the weekend announcements from finance officials at the Group of 20 summit in London that boosted European and Asian shares on Monday.

The officials welcomed improvements in economic growth but warned recovery was not sustainable without continued government help in the form of deficit spending, low interest rates and efforts to expand the money supply.

New York's Dow Jones industrial average moved up 41.8 points to 9,483.1 after losing just over one per cent last week.

The Nasdaq composite index gained 14.8 points to 2,033.58 while the S&P 500 index rose eight points to 1,024.4.

Elsewhere on the TSX, the base metals sector moved ahead 3.3 per cent as December copper rose 10 cents to US$2.97 a pound. Teck Resources gained $1 to $27.50 while Equinox Minerals (TSX: EQN.TO) improved 18 cents to $3.06.

All sectors were higher on the Toronto market.

In economic news, contractors took out just over $4.6 billion worth of building permits in July, 11.4 per cent fewer than in June. But Statistics Canada says an important factor in the decline was the strike by civic workers in Toronto, which shut down municipal offices for most of the month.

Excluding Toronto, the total value of building permits declined by 1.8 per cent.

In other corporate news, Fairfax Financial Holdings Limited (TSX: FFH.TO) is to offer nearly 2.9 million of its subordinate voting shares at US$347 each, for gross proceeds of US$1 billion. Net proceeds will fund the previously announced proposed acquisition of the remainder of Odyssey Re Holdings Corp. that it does not currently own. Its shares declined $7.43 to US$370.50.

Investors were encouraged by news that two British mobile phone companies may merge. Deutsche Telekom AG and France Telecom SA said they intend to combine their British mobile phone units - T-Mobile UK and Orange UK - to form the country's biggest mobile operator.

And while Cadbury PLC has rejected a takeover bid from Kraft Foods Inc., companies' reviving interest in making acquisitions is being seen as a positive sign for the economy.

Overseas, Japan's Nikkei 225 stock average advanced 0.7 per cent, at 10,393.23 despite a steep fall in the nation's current account surplus underlining prolonged weakness in exports - a key driver of growth for the world's No. 2 economy.

Hong Kong's Hang Seng gained 2.1 per cent.

London's FTSE 100 index and Frankfurt's DAX gained 0.5 per cent, while the Paris CAC 40 was ahead 0.29 per cent.