At midday: TSX trims gains as gold turns negative

The Canadian Press

Gold bars are displayed at bullion house in Mumbai. (ARKO DATTA/REUTERS)

The Toronto stock market was higher Wednesday with the focus on central banks as the Bank of Canada left its key rate unchanged and the chairman of the Federal Reserve reassured on economic stimulus.

The S&P/TSX composite index was off the best levels of the day as the gold sector turned negative but at late morning was still up 50.87 points to 12,567.76.

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The Canadian dollar was down 0.48 of a cent to 95.99 cents US as the Bank of Canada kept its key rate unchanged at one per cent and indicated it is in no rush to raise rates.

U.S. indexes were slightly higher amid remarks from Federal Reserve chairman Ben Bernanke that the Fed could slow the pace of a key element of economic stimulus later this year if the economy strengthens. But Bernanke cautioned that the Fed wants to see substantial progress in the job market before scaling back its $85-billion in monthly bond purchases.

The Dow Jones industrial gained 23 points to 15,474.85, the Nasdaq rose 11.20 points to 3,609.7 and the S&P 500 index gained 6.1 points to 1,682.36.

Bernanke also said in testimony before a congressional committee that the Fed’s timetable for reducing its bond purchases is not on a “preset course”. And he said the Fed could increase or decrease the amount based on how the economy performs.

“Overall, this was just another opportunity for Gentle Ben to calm the nerves of the bond market, and seems to be working in that direction,” said CIBC World Markets chief economist Avery Shenfeld.

Markets went through weeks of volatility after Bernanke first mentioned in late May that the Fed could start tapering its bond purchases, which have kept interest rates low and fuelled a rally on stock markets, later this year and wind it up by the middle of next year.

Stocks plunged at that time, even though Bernanke’s comments were generally in line with what economists had been expecting. Investors feared Bernanke’s comments meant the Fed was ready to let rates rise sooner and faster than they’d expected.

Since then, the Fed has tried to soothe nerves by stressing that the Fed won’t pull back on its stimulus unless the evidence was clear that the economy and the job market were improving as much as the Fed had forecast.

There were also major U.S. earnings report to digest.

Bank of America earned $3.6-billion or 32 cents a share in the quarter after payments to preferred shareholders, up 70 per cent from a year ago. The results were seven cents higher than analyst forecast and its shares were up 14 cents to $14.06.

Total revenue was $22.9-billion after stripping out one-time charges, up three per cent from a year ago and better than the $22.8-billion expected by analysts polled by FactSet.

And after the markets closed Tuesday, Yahoo Inc. said it earned $331-million, or 30 cents per share, in the three months ending in June. That compared with net income of $227-million, or 18 cents per share, at the same time last year. Ex-items, earnings were 35 cents per share, a nickel above the average estimate among analysts surveyed by FactSet and its shares soared $2.06, or 7.6 per cent, at $28.94.

On the economic front, U.S. builders started work on fewer homes and apartments in June. However, the slowdown wasn’t enough to suggest the housing recovery is faltering.

Developers began construction at a seasonally adjusted annual rate of 836,000 homes in June, nearly 10 per cent below May’s total of 928,000, which was revised higher.

Despite June’s decline, which was mainly centred on apartments, builders started work on 10 per cent more homes in June compared with a year earlier. And permits are 16 per cent higher than a year ago.

Most TSX segments were positive and the industrials group rose 0.75 per cent as Canadian National Railways gained $1.02 to $105.38.

Financials rose 0.6 per cent with Royal Bank ahead 47 cents to $63.05.

Tech stocks also lifted the TSX as BlackBerry improved by eight cents to $9.57.

The base metals sector lost early momentum but was still ahead 0.37 per cent as September copper on the Nymex dipped five cents to $3.13 a pound. First Quantum Minerals advanced 14 cents to $15.92.

The energy sector edged up 0.34 per cent while the August crude contract in the New York Mercantile Exchange up 22 cents to $106.22 a barrel. Canadian Natural Resources was ahead 34 cents to $33.27.

The gold sector lost about one per cent as August bullion shed early gains to move down $9.40 to $1,281 an ounce. Iamgold faded eight cents to $4.78.

In other corporate news, movie threatre operator Cineplex Inc. has made a conditional offer to buy EK3 Technologies Inc., a private company based in London, Ont., that provides in-store digital signage for major retailers and financial institutions. Cineplex says it would pay about $40-million up front plus the potential for performance-related payments that could push the total to $78-million. Cineplex gained 28 cents to $37.99.

Jovian Capital Corp. said Tuesday it has entered into an acquisition agreement with Industrial Alliance Insurance and Financial Services Inc. Jovian said the life and health insurance company has agreed to pay $10.23 in cash or a 0.2386 portion of Industrial Alliance’s common share for all issued and outstanding shares of the Toronto-based wealth and asset manager. Jovian shares surged $3.11 or 44.11 per cent to $10.16.

European bourses were positive with London’s FTSE 100 index up 0.48 per cent, Frankfurt’s DAX climbed 0.75 per cent and the Paris CAC 40 gained 0.57 per cent.

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