Newspaper article The Canadian Press

TSX Little Changed: Optimism over European Bond Auctions Tempered by U.S. Data: TSX Little Changed on U.S. Economic Data

Newspaper article The Canadian Press

TSX Little Changed: Optimism over European Bond Auctions Tempered by U.S. Data: TSX Little Changed on U.S. Economic Data

Article excerpt

TORONTO - The Toronto stock market eked out a small gain Thursday as investors balanced disappointment in two U.S. economic reports with the positive influence of successful bond auctions by Italy and Spain.

The S&P/TSX composite index rose 13.38 points to 12,274.32 while the TSX Venture Exchange was ahead 9.38 points to 1,540.5.

The Canadian dollar rose 0.09 of a cent to 98.2 cents US.

The Dow industrials rose 21.57 points to 12,471.02 as U.S. retail sales rose by only 0.1 per cent in December against expectations for a 0.2 per cent rise. And during the most important month of the year for retailers, the strength last month was led by a 1.5 per cent jump in auto sales.

Also, applications for weekly unemployment benefits spiked by 24,000 to 399,000 last week, largely because companies let go thousands of workers after the holiday season.

The Nasdaq was ahead 13.94 points to 2,724.7, while the S&P 500 index added 3.02 points to 1,295.5.

The negative data came after a string of recent news that reassured investors that the economic recovery continues and that the United States should be able to avoid slipping back into recession.

Those reports showed faster than expected expansion in the manufacturing sector and employment growth last month exceeding expectations. Meanwhile, the Federal Reserve chimed in Wednesday, saying all but one of its 12 banking districts experienced some growth from late November through the end of the year.

"It's not bad, it's not explosive but you wouldn't expect an explosive economic recovery coming out of the U.S. after a banking and housing crash," said Chris King, portfolio manager at Morgan, Meighen and Associates.

"It takes a while before all the credit channels are able to start to be deployed again and you're starting to see that again, you're starting to see a little bit of a glimmer of positive things in the banking sector in the U.S."

King was also optimistic about the U.S. housing sector showing some real improvement this year.

"Housing starts will get a bit better, you start to see inventory declining, starting to see more glimmer of interest and prices have probably stabilized."

There was relief on financial markets as Italy saw its borrowing costs drop sharply while easily selling [euro]12 billion in bonds in its first test of market sentiment of the new year.

And Spain successfully raised nearly [euro]10 billion in debt auctions Thursday in a sign of investor confidence in the new conservative government's attempts to get a grips on the country's debt.

The solid showing from both bond auctions comes after the European Central Bank late last month offered to lend US$641 billion to 523 euro-area banks in a massive three-year funding operation.

And analysts said the auction signalled that instead of just stashing the money with the ECB, that banks were actually putting the money to work. …

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