Weak U.S. dollar sends oil, metals, TSX and CE$ higher; N.Y. also advances

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(The Canadian Press)

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market traded near its best levels of the year Tuesday afternoon, with energy stocks providing major lift as oil prices surged on optimism over a weekend pledge by the world's 20 biggest economies to support the global recovery with stimulus efforts.

The S&P/TSX composite index had enjoyed a rise of almost 160 points in early trading but by mid-afternoon the main index was up 77 points to 11,094.5 as gold prices retreated from highs of over US$1,000 an ounce.

"(The economy) is on a form of life support," said Kate Warne, Canadian markets specialist at Edward Jones in St. Louis.

"And I think it was reassuring that they said there is no exit any time soon, so that the worry that somehow the world economy was going to go back into some sort of dire downturn seems to be at least a bit removed now."

Commodity prices rose amid a sharply lower U.S. dollar, which also gave a big lift to the Canadian dollar, off earlier highs but still up 0.83 cents to 92.85 cents US.

With a global economic recovery under way and signals from the weekend's meeting of G20 finance ministers that stimulus efforts will continue, "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 2.34 per cent with the October crude contract on the New York Mercantile Exchange ahead $3.20 to US$71.22 a barrel. EnCana Corp. (TSX: ECA.TO) climbed 84 cents to $56.69 and Suncor Inc. (TSX: SU.TO) moved up $1.08 to C$35.08 on the TSX.

The gold sector inched into negative territory as the December bullion contract ran up $3.10 to US$999.80 an ounce, off early highs of US$1,009.70.

Iamgold Corp. (TSX: IMG.TO) shares faded 39 cents to C$14.64 after it said it plans to increase gold production during the initial years of operation at its Essakane project in Burkina Faso, West Africa.

Silver Wheaton Corp. (TSX: SLW.TO) shares gained 19 cents to $12.84 after announcing it will pay US$625 million over three years plus ongoing payments linked to market prices to buy some of the silver produced from four Barrick Gold (TSX: ABX.TO) mines.

The TSX Venture Exchange climbed 13.43 points to 1,242.68.

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 were also off early highs, up 31.5 points to 9,472.8.

The Nasdaq composite index gained 9.71 points to 2,028.49 while the S&P 500 index rose 6.35 points to 1,022.75.

Elsewhere on the TSX, the base metals sector moved ahead two per cent as December copper rose 11 cents to US$2.97 a pound. Teck Resources (TSX: TCK-B.TO) gained 81 cents to C$27.31 while Equinox Minerals (TSX: EQN.TO) improved five cents to $2.93.

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 Ltd. (TSX: FFH.TO) is to offer nearly 2.9 million subordinate voting shares at US$347 each for gross proceeds of US$1 billion. Net proceeds will fund the proposed acquisition of the remainder of Odyssey Re Holdings Corp. that it does not currently own. Its shares declined $7.33 to C$370.60.

Shares in Telus Corp. were ahead 18 cents to C$34.61 after it announced it has acquired Black's Photo Corp. for approximately $28 million.

The Forzani Group Ltd. (TSX: FGL.TO) plans to consolidate its two outdoor and lifestyle banners, Coast Mountain Sports and Atmosphere, to create a single national outdoor lifestyle banner under the Atmosphere name. Its shares were down 13 cents at $14.37.

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.

General Motors Co.'s board begins a two-day meeting in Detroit Tuesday that could see it decide the fate of its European unit Opel. GM, which has repeatedly delayed a decision, has two bids for Adam Opel GmbH to choose from. German officials, Opel workers and unions have repeatedly - and loudly - declared support for the offer from Canadian auto parts maker Magna International Inc. (TSX: MG-A.TO) and Russian state-backed bank Sberbank. Magna shares were off $1.56 to $45.44.