Canada Stocks Jump Most in 11 Weeks as Fed Holds on Rate Hike

  • S&P/TSX trades near 2-week high after rising in 5 of 6 days
  • Gold miners boost raw-materials, energy rallies with crude

Canadian stocks surged the most in more than two months as gold miners got a boost after the Federal Reserve left stimulative interest rates unchanged while signaling the world’s largest economy is showing signs of improving.

The S&P/TSX Composite Index added 1.3 percent to 14,710.82 at 4 p.m. in Toronto, extending gains after the Fed decision from Washington. It was the biggest rally in two months, driven by materials producers in the equity benchmark, which jumped 4.6 percent as a group, the most June 3.

“Gold and gold stocks are taking off here, it underscores the low-rate environment,” said Scott Colbourne, co-Chief Investment Officer at Sprott Asset Management in a phone interview from Toronto. His firm manages almost C$9 billion. “Materials, energy as well as base metals will continue to have a bit of a lift here. Broadly speaking I don’t see a real reason to break away from broad themes of support for the Canadian stock market and base metals.”

In a decision to leave interest rates unchanged that saw three officials dissent in favor of a quarter-point hike, Fed policy makers said near-term risks to the economic outlook were “roughly balanced.” While the case for an increase in borrowing costs has strengthened the central bank is awaiting more evidence of progress towards its goals. Traders now see a 60 percent likelihood for a rate increase by the end of the year.

Raw-materials producers led gains in the S&P/TSX as Barrick Gold Corp. and Goldcorp Inc. jumped at least 6.2 percent. Gold, seen as a store of value against other assets in a low-inflation environment, extended gains after the Fed decision. Tighter monetary policy is typically negative for gold because the metal doesn’t pay interest.

The Bank of Japan earlier shifted the focus of stimulus from expanding the money supply to controlling interest rates, which some economists deemed as further evidence that BOJ policy had reached the limits of its effectiveness.

Energy companies climbed 1.4 percent, tracking a rally in oil after Algeria said OPEC may turn its informal talks next week into a formal session. OPEC members are focused on either boosting output or defending their market share, and will have difficulty reaching a deal, according to a Bloomberg survey. Crude extended gains after weekly data showed U.S. stockpiles unexpectedly dropped. TransCanada Corp. added 0.8 percent, closing at a record.

Encana Corp. advanced 1.7 percent, after yesterday’s slump of 7.6 percent. The drop stemmed from selling about $1 billion of shares to fund drilling in Texas next year and repay debt.

Financial services stocks rose 0.6 percent. TMX Group gained 1.8 percent, the most in a month, after eliminating 95 full-time positions in the third quarter and targeting further cost reductions. Manulife Financial Corp. increased 0.9 percent, to the highest in almost three months.

D-Box Technologies Inc. jumped 14 percent, the biggest one-day rally in more than a year. The company will install its special cinema seats designed to move in time with the action in a 143-seat auditorium in China.

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