TSX advances, Bank of Canada leaves rates unchanged, revises forecast; N.Y. down

By Malcolm Morrison, The Canadian Press

TORONTO - Higher commodity and technology stocks pushed the Toronto stock market slightly higher Tuesday with investors reassured that the Bank of Canada is leaving interest rates at 0.25 per cent - and will likely keep rates that low until the middle of next year.

The S&P/TSX composite index moved up 29.9 points to 11,568.3 as the central bank added that recent indicators point to the start of a global recovery "from a deep, synchronous recession."

But it warned that heightened volatility and the sharp rise in the Canadian dollar "are working to slow growth and subdue inflation pressures."

"The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July," the bank said in a statement.

The loonie started 2009 at 82.1 cents US and on Tuesday was down 0.91 of a cent to 96.24 cents US as the bank said the country's gross domestic product is still expected to grow by three per cent next year, but only 3.3 per cent in 2011, two-tenths of a point less than the Bank of Canada had previously forecast in July.

The Canadian dollar has seen particularly sharp runups of late because of a weakening U.S. dollar and higher commodity prices, particularly oil.

Toronto energy stocks higher with oil prices stable at one year highs. The November crude contract on the New York Mercantile Exchange eased two cents to US$79.59 a barrel.

The TSX Venture Exchange moved up 3.13 points to 1,341.9.

In other economic data, Statistics Canada's composite leading index - a snapshot of future economic activity - rose by 1.1 per cent in September, its fourth straight gain. And the August reading was revised up from 1.1 per cent to 1.2 per cent. In September, seven of the 10 components advanced, led again by the stock market and the housing index.

And wholesale sales in current dollars fell 1.4 per cent in August to $41 billion.

Statistics Canada blames weaker sales in automotive products, machinery and electronic equipment, and building materials for the decline.

New York markets were weak as investors balanced positive earnings reports with mixed economic data.

The Dow Jones industrial average declined 23.4 points to 10,068.8.

The Nasdaq composite index pulled back 4.47 points to 2,171.85 and the S&P futures was down 4.25 points to 1,093.65.

The latest bout of earnings optimism took off after the market close Monday when both Apple Inc. and Texas Instruments delivered better-than-expected earnings reports and helped restore investor confidence that was shaken late last week by big banks' loan losses.

Chemical maker DuPont and health insurer UnitedHealth Group Inc. each cited cost-cutting efforts as they reported better results for the July-September period from a year earlier. Pfizer Inc., the world's biggest pharmaceutical company, also reported that lower expenses boosted its earnings.

Caterpillar also surprised even as it said its profit plunged in the latest quarter as construction companies bought fewer of its big yellow-and-black machines.

But the company said it sees rebounding demand worldwide and it lifted its profit outlook for the year and its shares ran ahead $2.65 to US$60.50.

Shares in Vancouver-based Finning International (TSX: FTT.TO), which is the world's largest Caterpillar equipment dealer, moved up 34 cents to $17.25.

There were also mixed signals from new U.S. government reports on the state of the economic recovery.

The Labour Department said lower energy prices pushed U.S. wholesale prices lower in September, leaving a larger-than-expected monthly decline in the producer price index. Wall Street economists expected a flat reading.

Separately, the Commerce Department said home building rose a third time in four months during September, reflecting higher sales this year. The increase, however, was smaller than expected.

The gold sector advanced 0.46 per cent as December bullion gained $6.70 to US$1,064.80 an ounce.

The TSX base metals sector rose 0.72 per cent as the December copper contract on the New York Mercantile Exchange was up a cent at US$2.98 a pound after surging 12 cents on Monday.

The TSX tech sector rose 0.54 per cent with share in Aastra Technologies Ltd. (TSX: AAH.TO) surging $4.23 to $28.04 after it said Monday it will begin issuing a quarterly dividend due to a jump in its third-quarter profit. The communications equipment maker said shareholders will receive a 15-cent dividend after its profits nearly tripled to $9.6 million.

In other corporate news, a Spanish union is planning to strike at an Opel auto plant to protest job cuts planned by Canadian auto parts giant Magna International (TSX: MG-A.TO). Magna has said it wants to lay off 1,350 of the 7,500 workers at Zaragoza and shift part of the factory's production to Germany as part of its takeover of Opel from General Motors Co. Magna shares were off 15 cents to $46.90.

Air Canada's (TSX: AC-A.TO) unionized employees are about to become shareholders with a 15 per cent stake in the airline in exchange for agreeing to a pension moratorium. The airline plans to issue next week more than 17.6 million class B shares to a new trust on behalf of its Canadian-based unions. Its shares were up four cents at $1.46.

Swiss drug company Lonza Group has withdrawn a US$485-million takeover offer for Canadian pharmaceutical products company Patheon Inc. (TSX: PTI.TO), after the deal was blocked by investment firm JLL Partners. The New York company is Patheon's largest investor. Patheon shares fell 14 cents to $2.70.

Overseas, Japan's Nikkei 225 index gained one per cent and Hong Kong's index rose 0.8 per cent.

London's FTSE 100 was off 0.17 per cent, Frankfurt's DAX dipped 0.1 per cent, while the Paris CAC 40 was flat.