The Toronto stock market was higher Tuesday amid strong U.S. manufacturing and housing data along with rising commodity prices.
The S&P/TSX composite index gained 92.46 points to 11,929.32 following a string of losses on concerns about the prospect of the U.S. Federal Reserve turning off the stimulus taps and trouble in China's credit system.
The Canadian dollar slipped 0.18 of a cent to 95.19 cents US after a stronger U.S. dollar pushed the loonie down Monday to its lowest levels since October 2011.
U.S. indexes were also positive with the Dow industrials ahead 103.4 points to 14,762.96, the Nasdaq up 35.31 points to 3,356.07 and the S&P 500 index climbed 14.13 points to 1,587.22.
The Standard & Poor's/Case-Shiller 20-city home price index shows that U.S. home prices jumped 12.1 per cent in April from a year ago, buoyed by strong demand and a limited supply of available homes. Strong gains in a wide range of cities point to a broad-based housing recovery. The index also showed a 2.5 per cent increase in April from March, the biggest month-over-month gain on records dating back to 2000.
Other data showed that U.S. businesses ramped up orders for long-lasting manufactured goods in May. The Commerce Department says that orders for durable goods increased 3.6 per cent last month, matching April's gain, but it was also much stronger than most economists had expected. It is the first time since late 2011 that orders have risen for three consecutive months.
Both Toronto and New York markets racked up triple-digit slides on Monday as traders gauged the effect from China raising its interbank lending rate to over 13 per cent as part of an effort to trim off-balance-sheet lending that could threaten the financial stability of the world's second-largest economy.
But markets feared the move could also hurt economic growth. China's major state-owned banks are unwilling to lend to any but their biggest clients, so the vast majority of smaller businesses must rely on informal lending.
Markets were reassured on that front Tuesday after comments from the People's Bank of China and other key government agencies.
The PBOC indicated that there is enough liquidity at the moment but that it will work to guide interest rates to a reasonable range.
Colin Cieszynski, market analyst at CMC Markets Canada, also noted that officials indicated that moves are underway to bring in deposit insurance regulations and other financial market reforms.
"As with Europe a few years ago, the street's biggest concern of late was that government officials were not paying attention raising the risk the whole problem could spiral out of control," he said.
Markets have also sold off on worries that the U.S. Federal Reserve is prepared to put the brakes on its program of bond buying. Those $85-billion (U.S.) of purchases every month have kept long-term rates low and helped many stock markets to rise sharply this year.
Rising bond yields have also spooked markets. Yields have spiked to almost two-year highs – as much as 2.6 per cent on Monday and down to 2.53 per cent Tuesday morning. The yield on the benchmark 10-year Treasury stood at 2.25 per cent last Wednesday before Fed chairman Ben Bernanke indicated that the Fed could start winding up the bond buying program later this year.
Traders also took in some major acquisition news in the health-care sector.
Two of Canada's largest medical lab operators will be combined under a $1.22-billion friendly takeover deal backed by one of Ontario's largest public sector pension funds. Assuming the deal is approved, LifeLabs Medical Laboratory Services will pay $10.75 per share cash and assume $255-million of debt to acquire all of CML HealthCare Inc. of Mississauga, Ont.
LifeLabs serves about 10 million patients and nearly 20,000 physicians in Canada, mainly in Ontario and British Columbia. CML HealthCare Inc. has 112 client care centres in Ontario. It also has 82 imaging centres in Ontario and British Columbia but has been divesting its imaging business to focus more on its medical diagnostic labs. CML shares jumped $3.39 to $10.59.
Several major financial services companies, including Royal Bank of Canada, are planning to set up a new Canadian stock market. The venture, to be called Aequitas Innovations Inc., would be an alternative to the Toronto Stock Exchange and other markets owned by TMX Group Inc. Aequitas says it intends to introduce meaningful competition, reduce costs and improve market efficiency through innovation.
Commodity prices were positive following a series of steep losses caused by demand concerns and the higher U.S. currency. The TSX base metals component rose 2.12 per cent as the July copper contract on the New York Mercantile Exchange was ahead five cents at $3.07 a pound. First Quantum Minerals advanced 29 cents to $14.58.
August crude on the Nymex was 44 cents higher to $95.62 a barrel and the energy sector rose 0.8 per cent. Cenovus Energy was ahead 30 cents to $29.38.
The gold sector was ahead 1.1 per cent while August bullion rose $2.60 to $1,279.70 an ounce. Goldcorp Inc. was up 33 cents to $24.97.
Outside the resource sector, the information technology sector provided support, up 1.7 per cent with BlackBerry ahead 33 cents to $15.08.
Earlier in Asia, the Shanghai Composite Index fell another 0.2 per cent after plunging nearly 6 per cent the day before, its biggest loss in four years.
Elsewhere, Hong Kong's Hang Seng rose 0.2 per cent, Japan's Nikkei 225 shed 0.7 per cent, South Korea's Kospi dropped one per cent and Australia's S&P/ASX 200 was down 0.3 per cent.
European bourses were positive as London's FTSE 100 index rose one per cent, Frankfurt's DAX gained 1.29 per cent and the Paris CAC 40 climbed 1.5 per cent.