Stock markets move higher amid expectations for further Fed stimulus

TORONTO – The Toronto stock market was higher Wednesday as commodity prices gained ground and traders looked ahead to another dose of economic stimulus from the U.S. Federal Reserve.

The S&P/TSX composite index rose 29.12 points to 12,311.48 while the TSX Venture Exchange edged up 1.44 points to 1,185.37.

The Canadian dollar rose 0.09 of a cent to 101.49 cents US.

U.S. markets were mainly higher amid hopes for a resolution to the so-called fiscal cliff, an end-of-year deadline when automatic steep spending cuts and significant tax increases are set to take place. With economic growth already weak, the worry is that the two moves would slash growth further and send the U.S. back into recession, sending shockwaves around the world.

The Dow Jones industrials were off the best levels of the session ahead of the Fed’s midday announcement, up 15.3 points to 13,263.74, the Nasdaq was off 1.84 points to 3,020.46, and the S&P 500 index rose 2.22 points to 1,430.06.

The Fed is widely expected to announce a new bond-buying program at the end of its two-day policy meeting later Wednesday to replace one that’s about to expire.

The central bank has launched three rounds of quantitative easing since the financial crisis hit in 2008 and they have been widely credited with strengthening financial markets.

On the economic front, there was another indication that the recession in the eurozone is worsening.

Eurostat, the EU’s statistics office, said industrial production fell by a monthly 1.4 per cent in October, in contrast to expectations of a modest 0.2 per cent increase.

Germany, Europe’s biggest economy, fared particularly badly, with its industrial sector posting a 2.4 per cent monthly decline in output. Germany has seen its industrial sector shrink for three straight quarters.

The eurozone fell back into a mild recession in the third quarter.

Gold stocks led advancers as February bullion on the New York Mercantile Exchange gained $8.20 to US$1,717.80 an ounce. Barrick Gold Corp. (TSX:ABX) climbed 41 cents to C$33.95 while Goldcorp Inc. (TSX:G) improved by 42 cents to $37.

The utilities group was also supportive, up 0.5 per cent as Just Energy Group (TSX:JE) ran ahead 56 cents to $9.89.

The TSX was also lifted by a 0.35 per cent gain in financials as TD Bank (TSX:TD) climbed 54 cents to $81.15.

The metals and mining sector gained 0.36 per cent while copper prices lost early momentum and the March contract on the Nymex was unchanged at US$3.69 a pound. Turquoise Hill Resources (TSX:TRQ) was up 22 cents at C$7.57.

The energy sector was off 0.3 per cent as the January crude contract was up 52 cents to US$86.31 a barrel after OPEC oil ministers said at their meeting Wednesday that they would stick to current daily output targets of 30 million barrels.

But prices were off the highs of the morning after data showed an unexpected increase in crude supplies last week, along with a bigger-than-expected jump in gasoline inventories. Crude supplies rose by 800,000 barrels instead of an expected 2.5 million-barrel decline. Gasoline supplies climbed by five million barrels, about twice the amount forecast.

Cenovus Energy Inc. (TSX:CVE) fell 92 cents to $33.01 after it said this year’s cash flow is now forecast to come in lower than previously anticipated. That is because of lower crude prices, longer than expected maintenance downtime at U.S. refineries and a one-time cash tax expense. Cash flow is expected to be $3.7 billion, missing the range of $3.9 billion to $4.1 billion Cenovus forecast in October.

The telecom sector was the leading decliner with BCE Inc. shares (TSX:BCE) down 42 cents at $42.53 after subsidiary Bell Canada said it plans to make a $750-million payment toward its defined benefit pension plan to help improve its funded status. The pension plan’s financing costs will benefit from the stronger position of the plan and therefore will help increase earnings by two cents per share starting next year.

European bourses were mainly higher despite the industrial production report as London’s FTSE 100 index rose 0.19 per cent and Frankfurt’s DAX gained 0.26 per cent. The Paris CAC 40 slipped 0.05 per cent.

In corporate news, Bill Gates has increased his overall stake in Canadian National Railway Co. (TSX:CNR) to about 12 per cent. Cascade Investment LLC, a company owned by the founder of tech giant Microsoft, has acquired an additional 13,670 CN shares for $1.25 million.

The investment company now owns a total of 43 million CN shares representing 10 per cent of the company. Gates controls an additional 1.98 per cent of CN stock through the Bill & Melinda Gates Foundation, a charitable trust. CN shares were up 27 cents to $90.63.

Avon Products said it will cut about 1,500 jobs and exit the South Korean and Vietnamese markets as the struggling direct seller of beauty products takes some initial steps toward its cost-cutting goal. New York-based Avon said it plans to focus on high priority markets as part of a push to save US$400 million by 2015.