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A trader works on the floor of the New York Stock Exchange in New York July 20, 2012.

KEITH BEDFORD/REUTERS

Encouraging words from Europe's top central banker and stronger-than-expected U.S. economic data triggered a sharp rally on global markets, although the gains in Canada were more subdued.

In mid-day trading, the S&P/TSX composite index was ahead by 46 points or 0.4 per cent to 11,539. Shares in New York were below the highs set shortly after the opening, but the Dow Jones industrial average was still ahead by 151 points or 1.2 per cent.

The catalyst for the gains were comments by European Central Bank president Mario Draghi, who said he'd do everything in the ECB's power to defend the euro.

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Market players took the remarks to mean there would be more monetary easing in Europe, propelling risk assets higher.

"Longer term, this is one more step along the path that we believe will prevent the worst-case scenario (large scale sovereign defaults and a massive banking crisis) while not yet bringing Europe out of recession. Bulllish for equities, resources and cyclical currencies today," economist Avery Shenfeld of CIBC World Markets said in a note to clients.

The hopes for stimulus sent hard-hit Italian and Spanish stocks soaring by more than 5 per cent. French stocks rallied 3.7 per cent and in Germany, shares gained 2.5 per cent.

Investors also snapped up commodities, with gold rallying $8.60 (U.S.) an ounce to $1,613.40 and crude oil up 68 cents to $89.65 a barrel.

In the U.S., first-time jobless claims plunged by 35,000 to 353,000 last week, a much-larger-than expected decline. June durable goods orders rose 1.6 per cent, a further sign of strength in the U.S. economy.

Turning to big movers on the Toronto market, Barrick Gold Corp. plunged 7.2 per cent in active trading. The world's number one gold miner disappointed investors by reporting higher construction costs at a flagship Chilean mine.

Agnico-Eagle Mines reported better-than-expected second quarter results and increased production guidance for the year to 975,000 ounces from a previous range of 875,000 to 950,000. The shares soared 7.4 per cent.

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Potash Corp. of Saskatchewan fell 2.4 per cent. The fertilizer producer reported a large non-cash impairment charge in the second quarter.

In the U.S., Zygna, an on-line gaming company, sagged 39 per cent after an unexpected quarterly loss and reduced guidance for the rest of the year.

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About the Author
Investment Reporter

Martin Mittelstaedt has had a varied reporting career at the Globe and Mail, covering politics, the environment and business. He opened up the Globe's New York bureau for the Report on Business, and has also been on the banking and capital markets beats. He's written extensively on investing themes. More

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