Canadian stocks rallied, pushing the index to its highest close since April, after the U.S. Federal Reserve said it will buy mortgage-backed securities and keep interest rates “exceptionally low” to spur the economy.
Raw-materials producers jumped 3.1 percent, the most among 10 groups in the Standard & Poor’s/TSX Composite Index (SPTSX), as Barrick Gold Corp. (ABX) climbed 4.1 percent. Vero Energy Inc. (VRO) rallied 14 percent after agreeing to be bought by TORC Oil & Gas Ltd.
The S&P/TSX increased 127.54 points, or 1 percent, to 12,360.16 in Toronto. Trading was 28 percent higher than the 30- day average.
“The Federal Reserve is committed to generating some real growth,” Laura Wallace, vice president and portfolio manager for Scotia Private Client Group in Toronto, said in a phone interview. “Canada is an export-driven economy and very dependent on global economic growth. Anything that improves the outlook for the U.S. economy is very positive for Canada.”
The U.S. Fed said today in a statement that it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a bid to boost growth and reduce unemployment. The Federal Open Market Committee also said it would likely hold the federal funds rate near zero “at least through mid-2015.”
The S&P/TSX has climbed 3.4 percent this year, trailing all of the world’s 24 developed markets, except for Spain and Portugal, amid concern slowing global growth will hurt demand for oil and metals. Commodity companies account for about half the S&P/TSX.
Commodities surged to a four-month high on the Fed’s announcement, with the Standard & Poor’s GSCI Spot Index of 24 raw materials adding 0.7 percent to 687.22.
Barrick, the world’s largest gold producer, climbed 4.1 percent to C$40.32. Gold futures topped $1,770 an ounce for the first time since February after the Fed announcement stoked concern inflation will rise, boosting demand for the precious metal as an inflation hedge. Centerra Gold Inc. (CG) jumped 11 percent C$8.89.
Vero Energy surged 14 percent, the most since January, to C$2.59. The oil and natural-gas explorer agreed to be bought by TORC for about C$3 a share. Crude for October delivery advanced to a four-month high, rising 1.3 percent to settle at $98.31 a barrel in New York.
MacDonald Dettwiler & Associates Ltd. (MDA), which made the robotic arm for NASA’s defunct space shuttle, plunged 5.9 percent to C$50.65. Steven Arthur, analyst with RBC Capital Markets, cut the stock to sector perform from outperform.
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