The Toronto stock market was positive late morning Friday as commodity prices advanced at the end of a volatile week and borrowing cost pressures eased for Italy and Spain.
The S&P/TSX composite index climbed 49.13 points to 11,964.56 while the TSX Venture Exchange gained 8.55 points to 1,607.76.
The Canadian dollar advanced as traders were willing to take on more risk, up 0.2 of a cent to 97.45 cents (U.S.)
Traders also took in data showing that Canada's annual inflation rate fell three-tenths of a point to 2.9 per cent last month as the rate of price increases of most consumer goods measured by Statistics Canada moderated.
That's the first time the annual inflation rate has been within the Bank of Canada's one-to-three per cent comfort zone since July. As well, the bank's core inflation rate, which excludes volatile items such as energy and some foods, edged down one notch to 2.1 per cent
U.S. markets were mainly positive with the Dow Jones industrial index ahead 48.4 points to 11,819.13, the Nasdaq composite index slipped 1.24 points to 2,586.75 while the S&P 500 index was ahead 3.15 points to 1,219.28.
Stock markets are down sharply for the week as the European debt crisis worsened with borrowing rates in Italy and Spain surpassing seven per cent, a level analysts deem to be unsustainable in the long term.
“The bond market is driving the boat here, there's no doubt about that,” said Paul Taylor, chief investment officer at BMO Harris Private Banking.
“What needs to evolve is confidence, confidence that the solvency issues of euroland are manageable and the bond market is weighing in with its assessment and that is, that they're not.”
Stocks have slid despite positive U.S. economic data including rising retail sales, higher than expected housing starts and lower jobless insurance claims.
Instead, traders have been focused on the deepening debt crisis as borrowing rates jumped, not just for Spain and Italy but also traditionally strong countries like France.
Some of the pressure on Italy and Spain has eased through the week thanks to suspected buying of their government bonds by the European Central Bank. Analysts expect figures on Monday to show that the ECB, now led by Italian Mario Draghi, stepped up its money purchases this week, in effect to give politicians more time to get a grip on the mounting crisis. By buying their bonds, the ECB is hoping to keep a lid on their borrowing rates.
For now, there appears to be some calm in the bond markets, with Italy's 10-year yield up a tiny amount to 6.72 per cent. Spain's yield was also a little lower, at 6.35 per cent.
But there is still a great deal of worry about the potential damage to financial institutions if the debt crisis is allowed to drag on. The TSX financial sector was down 0.1 per cent with Royal Bank (TSX:RY) down 16 cents to $43.79 while Sun Life Financial (TSX:SLF) gave back 25 cents to $20.15.
Prices for oil and metals advanced Friday morning with the December crude contract on the New York Mercantile Exchange ahead eight cents to $98.90 (U.S.) a barrel. The energy sector was up 0.95 per cent as Suncor Energy (TSX:SU) gained 29 cents to $32.11 and Imperial Oil (TSX:IMO) climbed $1.12 to $43.12.
The base metals sector was ahead 0.58 per cent while the December copper contract on the Nymex gained three cents to $3.41 (U.S.) a pound. Quadra FNX Mining (TSX:QUX) rose 14 cents to $10.33.
The gold sector was ahead 0.74 per cent while the December gold contract climbed $7.20 to $1,727.40 (U.S.) an ounce. Barrick Gold Corp. (TSX:ABX) improved by 44 cents to $51.
European markets were mixed with London's FTSE 100 index down 0.73 per cent, Frankfurt's DAX lost 0.3 per cent and the Paris CAC 40 was off 0.26 per cent.
Earlier in Asia, South Korea's Kospi tumbled two per cent while Hong Kong's Hang Seng dropped 1.7 per cent and Japan's Nikkei 225 index slid 1.2 per cent.
In mainland China, the benchmark Shanghai Composite Index fell 1.9 per cent while the smaller Shenzhen Composite Index lost 2.7 per cent.
In earnings news, H.J. Heinz Co., the world's largest ketchup maker, said Friday its fiscal second-quarter net income fell almost six per cent to $237-million (U.S.). Revenue rose eight per cent to $2.83-billion and its shares fell 1.69 per cent to $51.13.
In other corporate developments, Yamana Gold Inc. (TSX:YRI) has started operations at its Mercedes mine in Sonora, Mexico. Yamana anticipates production to be 120,000 gold equivalent ounces each year, though the company said it's looking to boost production to 130,000 ounces per year by 2013. Yamana shares were up 11 cents to $16.05.
Follow us on Twitter: