Toronto's main stock index rallied to a session high at the close, powered by strength in financials, after optimism was boosted by unexpectedly strong earnings from J.P. Morgan. The heavily-weighted banking sector, up 1.76 percent, fully offset weakness among the materials group, which was dragged lower by the gold-miners for a second-straight session.
The Toronto Stock Exchange's S&P/TSX composite index gained 62.58 points, or 0.47 percent, to end at 13,464.06 and end the week up 1.44 percent. Eight of the index's 10 main groups were higher. Elvis Picardo, analyst and strategist at Global Securities in Vancouver, said the index was bumping up against resistance at 13,500. The index crossed briefly crossed this level twice this month, reaching its highest point in more than two years.
He said a new catalyst might be needed to push it beyond this resistance level, and perhaps it would come through earnings. Canadian results won't come in full force for a few weeks yet although several cable and media companies reported this week. "At this point in time, investors are taking their cues from earnings reports south of the border," said Picardo.
The J.P. Morgan results underscored improved sentiment and lit a fire under the financial groups in Canada, as they had in US stock indexes as well. All of the big domestic banks were up and were leading heavyweight advancers, topped by Toronto Dominion Bank, up 2.82 percent at C$76.17, while Royal Bank of Canada climbed 1.78 percent to C$53.89.
Energy shares were also prominent gainers, with Imperial Oil rising 2.18 percent to C$42.65 and EnCana up 2.77 percent at C$31.21. The oil and gas sector rose 0.62 percent. US crude futures eked out a gain, partly as J.P. Morgan's earnings signalled better oil demand going forward. Investors had worried earlier in the session that demand will be curbed after China lifted lenders' reserve requirements to tame inflation.
But materials slumped more than 1 percent, knocked down by gold-mining shares as the price of bullion slid on the Chinese rate news. China's move was the fourth in just over two months. It hit some resource prices and put pressure on commodity-linked currencies such as the Canadian dollar.
"China, when they move, they move in a very committed and forceful way. If they decide they're eliminating inflation in their economy or they're going to restrain their economic growth, they get it done," said Aaron Fennell, senior market strategist at commodity futures brokerage Lind-Waldock. Fennell said fears that China would slow down its economy so much that Canada would lose out on selling key exports such as metals, coal and oil, were overdone.
"They're just trying to slow down a trend, they're not trying to stop down growth ... so that's still good for Canada. The worst thing that we could have in Canada is having a China that is allowed to just continue to expand without any kind of restraint and then have a collapse." Baffinland Iron Mines shares rose nearly 2 percent C$1.55 after ArcelorMittal said it had joined forces with rival Nunavut to end their bidding war and make an improved, joint offer for the junior miner and it rich iron ore deposit in the Arctic.