The Toronto stock market closed higher Tuesday, boosted by rising gold stocks and despite news that Botox-maker Allergan has rejected the latest takeover offer by Quebec-based Valeant Pharmaceuticals.
The S&P/TSX composite index rose 33.17 points to 14,904.38. The Canadian dollar gained 0.03 of a cent to 91.71 cents US.
With nothing in the way of major economic or earnings news for investors to latch onto, the TSX took its guidance from strengthened gold stocks. August gold bullion ended the day up by $6.20 to US$1,260.10 an ounce. The July crude contract on the New York Mercantile Exchange fell six cents to US$104.35 a barrel and July copper gained a penny to US$3.05 a pound.
Ian Nakamoto, director of research at 3MACS, says the TSX is now on a course where it’s a slow “grind up,” with nothing in sight that might derail it.
“The easiest path for the markets seems to be up,” he said. “It’s not moving by leaps and bounds, just gradually up. The path of least resistance is up because momentum is with the stock market.”
Nakamoto said that despite talk about a correction in the Toronto market, he sees that as unlikely. Instead, Nakamoto said he wouldn’t be that surprised if the TSX surpasses its record close of 15,073, reached on June 18, 2008, just before the recession.
On Tuesday, Allergan said it was rejecting Valeant’s latest offer because it still undervalues the California-based company and claimed it creates significant risks and uncertainties for its shareholders.
Earlier this month, with the backing of activist shareholder Bill Ackman, Valeant (TSX:VRX) raised its stock-and-cash bid to about US$175 per share, valuing Allergan at some US$52.4 billion at current stock prices.
Allergan repeated its claim that Valeant has an unsustainable business model that relies on “serial” acquisitions and cost reductions. Valeant shares faded $1.25, or nearly one per cent, to C$136.78 on the Toronto Stock Exchange.
Meanwhile, Wall Street was flat after reaching near-record highs in the last few sessions. The Dow Jones industrials was up 2.82 points at 16,945.92 and the Nasdaq rose 1.76 points to 4,338, while the S&P 500 index dipped 0.48 of a point to 1,950.79.
The U.S. Commerce Department said U.S. wholesale businesses built up their stockpiles of goods in April, a sign that companies expect stronger economic growth in the coming months.
Wholesale stockpiles expanded 1.1 per cent in April, following a 1.1 per cent gain in March. The result marks 10 straight months of rising inventories. Sales at the wholesale level climbed 1.3 per cent, led by autos, furniture and pharmaceutical drugs compared with a 1.6 per cent gain in March. Year over year, sales are up 6.7 per cent.
Equities markets have been optimistic in recent days amid indications that global economies are faring well and that central banks are poised to pump in stimulus as necessary.
Last week, the European Central Bank announced that it was going to deal with the threat of deflation and give some lift to a tepid economic recovery in the eurozone by cutting its lending rate to 0.15 per cent from 0.25 per cent and dropping its overnight deposit rate to minus 0.1 per cent from zero.
There have also been positive signs elsewhere, with Japan reporting strong first-quarter growth, China seeing an improvement in exports and the U.S. ushering in a solid jobs report for May.
In Canada, a survey by international human resources firm Manpower Inc. suggests about 20 per cent of Canadian companies expect to add to their payrolls in the third quarter.
However, when seasonal variations are factored in, along with the four per cent of firms that expected to shed workers in the July-September period, the figure falls to 10 per cent.
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