A surprisingly strong reading on American consumer confidence helped underpin a solid gain on the Toronto stock market Tuesday morning.
The S&P/TSX composite index ran up 66.28 points to 12,762.65 as traders also reacted to an earnings report from Scotiabank that missed expectations.
The U.S. Conference Board’s consumer confidence index in the United States blew past expectations, coming in at a five-year high of 76.2, against the 72.3 reading that economists expected. The April reading was 68.1.
Scotiabank’s adjusted earnings came in a $1.24 per share, two cents short of analyst estimates, but its overall net income rose to $1.6-billion from $1.46-billion a year earlier. The profit attributable to common shareholders amounted to $1.23 per share, and compared with $1.15 per share a year earlier. Scotiabank shares were off early lows, down 42 cents to $59.19.
The Canadian dollar was off 0.03 of a cent to 96.71 cents US a day before the Bank of Canada makes its next interest rate announcement. The central bank is widely expected to keep its key rate unchanged for some time to come.
U.S. indexes were sharply higher as the Dow Jones industrials jumped 199.29 points to 15,502.39, the Nasdaq composite index gained 51.6 points to 3,510.74 while the S&P 500 index was ahead 22.72 points to 1,672.32.
CIBC World Markets senior economist Andrew Grantham said the U.S. consumer confidence index for May was supported by lower gasoline prices, soft inflation as well as rising home prices – which offset tax increases in January.
“A firmer labour market may have also played a role, with almost 11 per cent saying jobs were plentiful (up from 9.7 per cent) and the labour differential improving,” Grantham said.
Confidence also improved in Canada as the Ottawa-based Conference Board of Canada said its index rose 5.1 points to 80.7.
The U.S. data will be scrutinized for how it might influence the Fed. There have been jitters on stock markets due to speculation that the U.S. central bank might scale back its aggressive bond-buying program, which is meant to stimulate the economy, due to a recent improvement in some economic indicators.
Traders also took in further good news from the American housing sector. The S&P/Case-Shiller home price index for March rose by 1.12 per cent, higher than the 0.9 per cent pace that had been expected. The gain translates to a 10.87 per cent year over year gain – the first double-digit increase in over six years.
On the TSX, the industrials sector led advancers, up 1.3 per cent with Canadian Pacific Railway ahead $3.88 to $140.73.
The financial sector was up 0.8 per cent as Royal Bank gained 85 cents to $64.11.
Oil and copper prices advanced after being buffeted last week after a survey by HSBC Corp. showed a decline in China’s manufacturing for May. An official report on factory production in the world’s second-largest economy will be released later in the week. The July crude contract on the New York Mercantile Exchange was up $1.27 to $95.42 a barrel and the energy sector was up one per cent. Canadian Natural Resources advanced 34 cents to $31.46.
The base metals sector gained 0.65 per cent with July copper four cents higher to $3.34 a pound. HudBay Minerals was up 30 cents to $8.64.
The gold sector was the leading decliner, down 1.1 per cent as bullion prices slipped with the June contract in New York down $8.50 to US$1,378.10 an ounce. Barrick Gold Corp. faded 32 cents to $19.74.
There was also acquisition activity as Domtar Corp. said it has signed a deal to buy Associated Hygienic Products, a maker of store brand infant diapers in the United States, from DSG International for $272-million. Domtar shares improved by $1.82 to $72.47.
European bourses racked up strong gains as London’s FTSE 100 index ran ahead 1.88 per cent, Frankfurt’s DAX gained 1.5 per cent and the Paris CAC 40 was up 1.75 per cent.
Earlier in Asia, Tokyo’s Nikkei 225 index rose 1.2 per cent as the yen slipped against the U.S. dollar. The benchmark fell three per cent on Tuesday. Overall, the index has soared 37 per cent this year, a show of investor support for Prime Minister Shinzo Abe and his aggressive policies aimed at reversing years of economic malaise and deflation.
However, trading in Tokyo has been hugely volatile since last week amid concerns over the success of the country’s stimulus program.
Elsewhere, Hong Kong’s Hang Seng rose 1.1 per cent while South Korea’s Kospi gained 0.3 per cent and Australia’s S&P/ASX 200 advanced 0.2 per cent.
In other earnings news, high-end jewelry company Tiffany says its first-quarter net income rose three per cent to $83.6-million, or 65 cents per share as sales improved across all regions. Ex-items, earnings were 70 cents per share, well above the 53 cents that analyst expected. Revenue for the New York company known for its blue boxes rose 10 per cent to $895.5-million, topping Wall Street’s $855.7-million estimate and its stock was up five per cent to $80.