Newspaper article The Canadian Press

Toronto Stock Market Closes Higher, Bernanke Says Fed Ready to Act If Needed

Newspaper article The Canadian Press

Toronto Stock Market Closes Higher, Bernanke Says Fed Ready to Act If Needed

Article excerpt

TSX higher, Bernanke says Fed ready to act

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TORONTO - The Toronto stock market registered a solid gain Friday amid data showing rising Canadian economic growth, while U.S. Federal Reserve chairman Ben Bernanke kept the door open for another round of economic stimulus.

The S&P/TSX composite index rose 62.6 points to 11,949.26, while the TSX Venture Exchange was 22.89 points higher at 1,240.86.

The Canadian dollar closed up 0.67 of a cent to 101.45 cents US as Statistics Canada said gross domestic product increased by 0.2 per cent in June, against the 0.1 per cent rise that economists had expected.

The agency reported that GDP expanded at an annual rate of 1.8 per cent in the April-June period, slightly better than the 1.7 per cent pace recorded in the U.S.

U.S. indexes maintained a strong advance as Bernanke told an audience at the Fed's annual retreat in Jackson Hole, Wyo., that the Fed will act to promote growth as needed.

The Dow Jones industrials moved up 90.13 points to 13,090.84. The Nasdaq composite index climbed 18.25 points to 3,066.96 and the S&P 500 index rose 7.1 points to 1,406.58.

Traders had been encouraged for much of August that signs of a slowing global economy in mid-summer indicated that central banks would step in with more stimulus to keep the recovery on track.

Hopes had risen in particular after the release last week of minutes from the last Fed interest rate meeting Aug. 1 which said a growing number of members wanted to see the central bank do more to help the U.S. economy. And there had been speculation Bernanke would use Friday's much-anticipated speech to signal more assistance, possibly in the form of further quantitative easing. This involves the Fed printing more money to buy bonds.

But economic data released since then, including better than expected job creation in July, rising retail sales and a recovering housing sector, actually point to a strengthening economy, meaning the Fed could find it hard to justify more easing, analysts say.

"I think this is what Fed governors are saying, the conditions are just not in place for massive further stimulus," said John Tsagarelis, senior portfolio manager at Manulife Asset Management.

Bernanke suggested Friday that the Fed will consider further steps to boost the economy, which he describes as "far from satisfactory."

The Fed has its next interest rate announcement Sept. 14 and prior to that is the release next Friday of the U.S. non-farm payrolls for August. Job creation data for July beat expectations.

Traders also looked ahead to the European Central Bank's interest rate announcement on Thursday. There are expectations that the ECB will announce it is moving to help the most vulnerable members of the eurozone by controlling borrowing costs that ran ahead to unsustainable levels in Spain and Italy earlier this summer but have since retreated somewhat. …

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