TSX rallies for second day as bullion hits new record

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TSX rallies for second day as bullion hits new record
New York indexes plunge
The Canadian Press Aug 10, 2011 18:35:08 PM
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TORONTO (NEWS1130) - The Toronto Stock Exchange extended its rally to a second session Wednesday but the scene was completely different in New York, where another day of market carnage saw steep losses.

The S&P/TSX composite index closed up 89.63 points to 12,198.89, following a 438-point jump on Tuesday. The rise was due in large measure to gold stocks that rose as fresh worries about the European debt crisis pushed bullion past the US$1,800 mark for the first time and oil stocks driven higher by surging prices.

The main TSX index had soared Tuesday as investors bought up stocks beaten down during a market rout that carved 10 per cent from the TSX over the previous six sessions. The junior TSX Venture Exchange gained 40.91 points to 1,752.13.

The Dow industrials plunged 519.83 points to 10,719.94, wiping out Tuesday's strong gains. The Nasdaq composite index lost 101.47 points to 2,381.05 while the S&P 500 index lost 51.77 points to 1,120.76.

The central problems confronting markets remain: dwindling confidence in political leaders and central bankers to get a grip on the European government debt crisis and a growing conviction that the U.S. is sliding back into recession. A downgrade of U.S. government debt by S&P last Friday served to further sour investor sentiment.

Despite the positive showing on the TSX, volatility continued to rule the market with the main index down as much as 192 points earlier in the session

``This market is not trading on fundamentals, it's trading on fear,'' said Kathryn Delgreco, investment adviser at TD Waterhouse.

``It's now focusing on a loss of confidence.''

The Canadian dollar was down 1.64 cents to 100.52 cents US after the U.S. Federal Reserve promised Tuesday to leave interest rates ultra-low until mid-2013. Investors believe the Fed's stance on rates likely means the Bank of Canada is in no hurry to resume hiking interest rates. Markets had until recently expected that the central bank would start moving on rates this fall.

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The dollar is down sharply from a recent high of just over 106 cents at the end of last month as investors flocked to the safety of U.S. Treasurys and gold.

Problems in Europe were in focus Wednesday amid concerns that France could lose its AAA rating on government debt. Some analysts have warned that France _ the world's fifth-biggest economy _ can't afford to keep bailing out poorer European states especially at a time when its growth rates are moderating.

In addition, ``the French banks are under pressure today, there were rumours about Societe Generale running into liquidity issues, however, they came out and completely denied those rumours and still are maintaining that they have a triple A credit rating,'' added Delgreco. Still, the bank's shares tumbled almost 15 per cent in New York.

Those concerns pushed the TSX financial sector down 1.24 per cent as TD Bank (TSX:TD) fell $1.09 to $73.93 and Royal Bank (TSX:RY) dropped 51 cents to $49.73.

The gold sector charged ahead as investors looking for a safe haven continued to push bullion prices further into record territory with the December contract on the New York Mercantile Exchange up $41.30 to US$1,784.30 an ounce after hitting the US$1,801 mark. Barrick Gold Corp. (TSX:ABX) gained $2.88 to C$49.72 and Goldcorp Inc. (TSX:G) was ahead $3.30 to $50.54.

The energy sector was also supportive, up 1.03 per cent while crude oil prices advanced after worries about slowing demand pushed prices down 20 per cent from a recent high of almost US$100 on July 26. Crude was up $3.59 on the Nymex to US$82.89 a barrel. Suncor Energy (TSX:SU) gained 28 cents to C$31.28 and Canadian Natural Resources (TSX:CNQ) rose 56 cents to $35.35.

The base metals sector was down one per cent as metal prices lost early gains and the September copper contract on the Nymex lost eight cents to US$3.89 a pound. Thompson Creek Metals (TSX:TCM) gave back 35 cents to $7.45 while Teck Resources (TSX:TCK.B) gained 38 cents to $41.81.

Copper producer Quadra FNX Mining Ltd. (TSXUX) earned a second quarter profit of US$64 million or 33 cents a share, up from $37 million or 26 cents in the same period last year. Total revenues increased 76 per cent to $298 million from $169 million. Its shares were down 19 cents to $12.22.