Newspaper article The Canadian Press

TSX Surges 172 Points in Broad-Based Rally; Bank of Canada Keeps Rates Unchanged: Energy, Mining Stocks Push TSX Higher

Newspaper article The Canadian Press

TSX Surges 172 Points in Broad-Based Rally; Bank of Canada Keeps Rates Unchanged: Energy, Mining Stocks Push TSX Higher

Article excerpt

TORONTO - The Toronto stock market registered a solid advance Tuesday as resource stocks led a rebound across all sectors after a string of losses amid global economic uncertainty.

The S&P/TSX composite index jumped 171.94 points to 11,507.71 while the TSX Venture Exchange gained 7.02 points to 1,285.57.

The Canadian dollar gained 0.16 of a cent to 96.34 cents US as the Bank of Canada said that it was leaving its key interest rate unchanged at one per cent because of a worsening economic environment. It also kept the door open for future rate hikes.

In its accompanying statement, Canada's central bank said "to the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate."

Data showing greater expansion in the U.S. service sector helped lift markets.

New York's Dow Jones industrial average was up 26.49 points to 12,127.95.

The Nasdaq composite index added 18.1 points to 2,778.11 and the S&P 500 index climbed 7.32 points to 1,285.5 as the Institute for Supply Management's non-manufacturing index came in at 53.7, up from 53.5 in April.

The gain followed a slide of almost two per cent last week as the European debt crisis spread to Spain's banking sector.

"One of the real issues that investors are wrestling with is that people have lost confidence in the ability of the Europeans to deal with the problem (of recapitalizing their banking system)," said Norman Raschkowan, North American strategist for Mackenzie Financial Corp., adding the problems in the banking sector don't end at the Spanish border.

"The Italian banks are stretched and the French banks are stretched. I think unfortunately the Europeans still haven't come to that basic appreciation of how critical the capitalization of the banks is for confidence."

The country's banks are weighed by toxic loans following the implosion of the country's real estate sector in the wake of the 2008 financial collapse.

Spain's most stricken lender, Bankia S.A., needs [euro]19 billion in government aid, but Spain only has [euro]5 billion left in a [euro]19 billion fund that it established in 2009 to help banks.

Those banks may force the country to seek a bailout. Spain, strapped for cash, might have to tap European Union rescue funds, but it is reluctant to do so because such aid would come with strict conditions.

Spain has been forced to pay ever higher amounts of interest to attract buyers for its debt with the yield on the country's 10-year bond up 0.02 of a point to 6.42 per cent before dipping back to 6.31 per cent.

Spanish Treasury Minister Cristobal Montoro said Tuesday said that, given current borrowing costs, financial markets had effectively shut out the country.

And he repeated the country's calls for the European Union to move faster towards establishing a banking union that would allow ailing lenders to seek help without governments intervening. …

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