Newspaper article The Canadian Press

Strong U.S. Housing Data Pushes Stocks Higher amid Italian Election Uncertainty

Newspaper article The Canadian Press

Strong U.S. Housing Data Pushes Stocks Higher amid Italian Election Uncertainty

Article excerpt

TSX advances amid strong housing data

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TORONTO - Stock markets closed higher Wednesday as investors put aside concerns about an Italian election without a clear winner in favour of further indications of a strengthening U.S. housing sector and that the U.S. Federal Reserve will be keeping its economic stimulus program alive for awhile yet.

The S&P/TSX composite index was up 71.95 points at 12,732.39, held back by falling gold stocks, while the TSX Venture Exchange slipped 0.79 of a point to 1,131.12.

The Canadian dollar gained 0.32 of a cent to 97.75 cents US.

The Dow Jones industrials surged 175.24 points to 14,075.37, its highest close this year.

The National Association of Realtors said a measure of the number of Americans who signed contracts to buy homes rose in January from December to the highest level in more than two and a half years. Its seasonally adjusted index for pending home sales rose 4.5 per cent last month to 105.9.

Sales of previously occupied homes ticked up in January after rising to their highest level in five years in 2012.

The Nasdaq composite index was ahead 32.61 points at 3,162.26 and the S&P 500 index was up 19.05 points at 1,515.99.

Markets also took in a second day of Congressional testimony from U.S. Federal Reserve chairman Ben Bernanke, where he sought to reassure Congress members that the central bank has a handle on the risks of the central bank's aggressive program to buy US$85 billion a month in Treasurys and mortgage bonds.

As he did on Tuesday, Bernanke expressed confidence that the central bank's low-rate policies currently pose little risk of causing runaway inflation or a stock market bubble.

Traders also looked to Italy following an inconclusive election that saw voters reject parties supporting austerity to deal with the country's huge debt levels.

The centre-left alliance led by Pier Luigi Bersani narrowly won the lower house, but failed to gain control of the upper house. It is not clear what kind of coalition can be formed to give the country a government that can pass legislation and carry on with the financial reform that markets have demanded.

"I'm surprised that the market is not selling off more because this is not Greece, it's the third largest economy in Europe," said Rash Pashootan, vice-president and portfolio manager at Raymond James in Ottawa.

"And this uncertainty in terms of the potential of even seeing a hung government will have significant impact on (whether) bank lending freezes up because they're not sure which way the government will go. That will trickle down to small businesses, the backbone of the Italian economy."

The turmoil over the election results is already making itself felt in borrowing costs for Italy.

The country sold [euro]4 billion in 10-year bonds at a yield of 4.83 per cent, way up from 4.17 per cent last month. …

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