Shanghai rebound helps send TSX higher; economic data supports N.Y. indexes

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(The Canadian Press)

By Malcolm Morrison, The Canadian Press

TORONTO - Financials and base metals stocks helped take the Toronto stock market higher late Thursday morning as a strong showing on the main Chinese index made investors feel somewhat better about the prospect of an economic recovery.

The S&P/TSX composite index gained 48 points to 10,734.9 after the main Shanghai index ran up five per cent, reversing Wednesday's four per cent retreat.

The showing in Toronto comes during a volatile week with huge intraday swings in indexes as investors worry about the strength of an economic recovery and how much of a role the debt-laden U.S. consumer and Asian economies can play.

Before Thursday's advance, the Shanghai index was down more than 20 per cent from its early August peak, officially putting it into bear market territory.

Shares in aerospace company Bombardier Inc. (TSX: BBD-B.TO) were down 16 cents to $3.98 after it said its Aerospace division has terminated an order for Lear jets from Jet Republic that was worth up to US$1.5 billion.

The termination came as the business jet provider declared insolvency, just over a week after Bombardier cancelled an order from Italy's My Air for 15 of its CRJ1000 aircraft because the carrier faces financial uncertainty.

The energy sector made modest headway, ahead 0.24 per cent as crude prices moved slightly higher lower after data showing a big drawdown in U.S inventories last week sent oil up more than US$3 a barrel. On Thursday, the September crude contract on the New York Mercantile Exchange was up 14 cents to US$72.56.

The Canadian dollar was unchanged at 91.27 cents US as wholesale sales rose for the first time in nine months in June. Statistics Canada reports sales in current dollars rose 0.6 per cent to $40.4 billion.

The TSX Venture Exchange climbed 3.03 points to 1,179.98.

U.S. indexes were ahead slightly as employment data disappointed.

The Dow Jones industrials moved 34.2 points higher to 9,313.4.

The Nasdaq composite index advanced 13.79 points to 1,983.03 while the S&P 500 points edged up 8.1 points to 1,004.55 after the number of newly laid-off U.S. workers filing claims for unemployment benefits rose unexpectedly for the second straight week.

The Labour Department says the number of first-time jobless claims rose to a seasonally adjusted 576,000 last week, from a revised figure of 561,000.

Wall Street economists expected a drop to 550,000, according to a survey by Thomson Reuters.

"The weekly rise was disappointing, but we know how volatile these data are," said BMO Capital Markets economist Jennifer Lee.

"The pace of job losses has improved from what we saw earlier this year but it still looks like the U.S. economy shed another 300,000 jobs or so this month."

Other data suggested that the recession has bottomed out and growth in economic activity will begin soon.

The Conference Board's index of leading economic indicators, which is meant to project economic activity in the next three to six months, rose 0.6 per cent last month. That was slightly less than economists expected and down from a 0.8 per cent rise in June and a 1.2 per cent increase in May.

The news from retailer Sears Holdings Corp. wasn't good; the company lost money in its second quarter - missing expectations - as it was dragged down by lower sales, store closings, and severance and pension plan costs.

The retailer that owns Sears and Kmart stores lost US$94 million while revenue fell 10 per cent to US$10.55 billion. The retailer said it lost money in the second quarter as its sales fell and it closed stores and its shares fell $8.61 or 8.6 per cent to US$65.15.

Shares in Hormel Foods, maker of Spam, Dinty Moore stews and Chi-Chi's Mexican products, rose 22 cents to US$37.46 after it said Thursday that its third-quarter profit rose 49 per cent to beat estimates as costs fell.

Apparel retailer Gap Inc. also reports earnings Thursday.

The base metals sector advanced 1.9 per cent while September copper was down one cent at US$2.75 a pound. Teck Resources (TSX: TCK-B.TO) gained 93 cents to $28.59.

Mining giant Rio Tinto said sharp falls in metals and mineral prices were behind first-half profit dropping by nearly two thirds to US$2.5 billion. The world's third-largest miner was cautious about whether recent gains in commodity prices would be sustained and its shares slipped 17 cents to US$58.03 in New York.

The financial sector was up 0.5 per cent with Royal Bank (TSX: RY.TO) ahead 77 cents to $51.35.

The December bullion contract moved down $3.90 to US$940.90 an ounce and the gold sector was ahead 0.6 per cent. Goldcorp Inc. (TSX: G.TO) gained 43 cents to $38.77.

In other corporate news, Enerplus Resources Fund (TSX: ERF-UN.TO) units declined 86 cents to $21.73 as it grabbed a toe-hold in the northeastern United States' promising Marcellus shale gas play, paying US$406 million to three private U.S. natural gas companies for a stake in their properties.

The Calgary-based oil and gas trust said Wednesday it has struck agreements with Chief Oil & Gas LLC and its affiliates Chief Exploration & Development LLC and a limited partnership managed by Tug Hill Inc., to acquire part of their interests in the Marcellus play.

Overseas, Shanghai's main index surged 4.5 per cent while Japan's Nikkei 225 stock average advanced 1.8 per cent, while Hong Kong's Hang Seng rose two per cent.

London's FTSE 100 index, Frankfurt's DAX and the Paris CAC 40 were all ahead about 1.5 per cent.