Financials help push TSX slightly higher amid strong Citigroup earnings

TORONTO – The Toronto stock market racked up a minor gain Monday amid positive earnings from the American financial sector and economic data from China and the United States that was better than expected.

The S&P/TSX composite index shook off early losses thanks to gains in financials and industrials, edging up 27.92 points to 12,229.96, while the TSX Venture Exchange slipped 10.08 points to 1,282.73.

The Canadian dollar was down 0.07 of a to 102.04 cents US as commodities retreated and traders took in the Bank of Canada’s latest business outlook survey. The quarterly survey of top executives at 100 firms across the country shows a corporate sector that is far more concerned about the future than it was only three months ago, and planning accordingly.

U.S. markets advanced as Citigroup turned in earnings per share for the third quarter, excluding extraordinary items, of $1.06, a dime better than analyst estimates. Revenue, after special charges, was $19.4 billion, beating expectations of $18 billion and its shares ran up 5.5 per cent to US$36.66.

The earnings season kicks into high gear this week with 40 per cent of the Dow components reporting.

The Dow Jones industrials ran up 95.38 points to 13,424.23, the Nasdaq composite index added 20.07 points to 3,064.18 and the S&P 500 index was up 11.54 points to 1,440.13.

Buyers were also encouraged by data showing that U.S. retail sales rose sharply in September, up 1.1 per cent after a 1.2 per cent gain in August, which was revised higher. Both increases were the largest since October 2010.

Other data released Sunday showed that China’s consumer price index for September rose 1.9 per cent from a year earlier, down from a two per cent advance in August.

A report released late Friday after North American markets closed showed that China’s international trade surplus widened to $27.7 billion in September. Exports unexpectedly jumped 9.9 per cent year over year, which was the best pace in three months.

China’s third-quarter economic growth data will be released Friday. GDP growth is expected to ease to 7.4 per cent year-over-year, which would be the slowest pace since the first quarter of 2009. China has taken a series of steps over the last couple of years to slow its red-hot economy in order to get a grip on unacceptably high inflation levels.

Financials led advancers, up 0.56 per cent with Scotiabank (TSX:BNS) ahead 26 cents to $53.48, while Manulife Financial (TSX:MFC) shed 15 cents to $12.

Industrials were also supportive as Canadian Pacific Railway (TSX:CP) advanced 78 cents to $87.78.

Resource stocks weighed on the TSX with the gold sector down 0.4 per cent as the December bullion contract declined $22.10 to US$1,737.60 an ounce. Barrick Gold Corp. (TSX:ABX) faded 30 cents to C$38.01.

Argonaut Gold Inc. (TSX:AR) shares fell 81 cents to $9.67 as the company announced plans to acquire Prodigy Gold Inc. (TSXV:PDG) for shares and cash in a friendly deal valued at $341 million. Prodigy shares surged 29 cents or 42 per cent to 98 cents.

The energy sector slipped 0.1 per cent, reflecting a flat showing in oil prices. The November contract on the New York Mercantile Exchange closed down one cent to US$91.85 a barrel. Canadian Natural Resources (TSX:CNQ) lost 12 cents to C$30.13.

Copper prices failed to find lift from the Chinese data with the December contact unchanged at US$3.70 a pound and the base metals sector was slightly lower. Capstone Mining (TSX:CS) dipped three cents to C$2.34.

The company formerly known as Ivanhoe Mines says it has rejected the Mongolian government’s request to renegotiate an investment agreement for the Oyu Tolgoi mine, one of the world’s biggest new copper developments. Turquoise Hill Resources (TSX:TRQ) said the deal is a binding agreement. Its shares declined 44 cents to $8.12.

The small gain on the TSX follows a 1.74 per cent slide last week as buyers were discouraged by another downward revision to global economic growth by the International Monetary Fund.

But markets have been driven higher since the lows of early June on expectations that central banks would step up to keep the global recovery on the rails.

The European Central Bank said in early August that it would do whatever was necessary to preserve the monetary union. And U.S. Federal Reserve chairman Ben Bernanke followed up with another round of quantitative easing.

“We had a big run-up in front of it because Bernanke had pretty much telegraphed his intentions, the market rose in anticipation and now with that having been taken care of, it just kind of goes from sideways to down,” said Robert Gorman, chief portfolio strategist at TD Waterhouse.

Markets have also failed to find lift from the third-quarter earnings season, which got under way last week. Expectations are muted with analysts expecting a 2.1 per cent year over year decline in S&P operating earnings, which would be the first year over year drop since the recession that followed the 2008 financial collapse.

“When there have been questions about the economy and so on that have caused the economy to slump, quarterly earnings have come along to change that sentiment,” added Gorman.

“And whether or not that will happen this time around is debatable.”

In other corporate news, telecom giant Telus (TSX:T) says it will hold its shareholder vote to end its dual-class share structure after the Supreme Court of B.C. reaffirmed the validity of its plan, despite an appeals court ruling that sided with dissident shareholder Mason Capital Management. Telus closed up 11 cents to $62.82.

Japan’s Softbank Corp. has reached a deal to buy 70 per cent of U.S. mobile carrier Sprint Nextel Corp. for US$20.1 billion. The agreement will combine the third biggest mobile carriers of both Japan and the U.S.