Toronto stock market up slightly amid mixed earnings, hopes for ECB rate cut

TORONTO – The Toronto stock market closed slightly higher Wednesday amid positive earnings news and hopes that the European Central Bank will cut interest rates to help a weak economy recover.

The S&P/TSX composite index was up 18.7 points to 13,380.41, with added strength from the mining components.

The Canadian dollar was up 0.37 of a cent to 95.99 cents US amid strong housing data. Contractors took out $6.5 billion worth of building permits in September, up 1.7 per cent from August and much higher than the 0.7 per cent rise that had been expected.

U.S. indexes were mainly higher as the Dow Jones industrials ran up 128.66 points to an all-time high of 15,746.88. The Nasdaq fell 7.92 points to 3,931.95 while the S&P 500 index gained 7.52 points to 1,770.49.

Hopes rose Thursday that the European Central Bank would announce a rate cut to a record low of 0.25 per cent after the EU’s statistics office said that retail sales across the 17-country eurozone fell 0.6 per cent in September from the month before.

Markit, the financial information company, revealed that its Eurozone composite purchasing managers’ index, a broad gauge of economic activity, faltered in October.

The index slipped from a 27-month high of 52.2 in September to 51.9 points last month, although the October figure was revised up from the initial estimate of 51.5. Although it was above the 50 threshold indicating expansion, the figures suggest the European recovery lacks strength and is vulnerable to setbacks.

“It’s going to be a long arduous process digging out from under sovereign debt and all the other issues they face there,” said Bob Gorman, chief portfolio strategist at TD Waterhouse.

“The likelihood is they have passed the worst in Europe, not that it’s going to be easy, but that’s probably the case and I think they have to be nurturing this very carefully and the ECB moves will be part of that.”

The ECB holds its regularly scheduled interest rate meeting on Thursday.

On the earnings front, autoparts company Magna International’s (TSX:MG) quarterly revenue was up 13 per cent to US$8.3 billion. However, net income fell from last year, dropping to US$319 million, or $1.39 per diluted share, from $390 million a year ago amid restructuring charges. The results beat analyst expectations and its shares rose $1.21 to $90.19.

“I think the real story here was the top line, the sales,” added Gorman.

“You have a situation in which Magna is getting more out of each vehicle that is constructed. In contrast with many, many companies which are having a really tough time increasing the revenue number much, Magna really stands out here.”

Oil and gas producer Talisman Energy Inc. (TSX:TLM) posted a quarterly US$45 million loss from operations, or four cents per share, up from a loss $36 million or four cents per share a year earlier. Its shares slipped 34 cents to C$12.48.

Enbridge Inc. (TSX:ENB) says its adjusted earnings in the third quarter rose to $278 million or 34 cents a share, which was up four per cent from a year earlier but a penny short of analyst estimates. Its shares rose 76 cents to $46.56.

Molson Coors Brewing’s (TSX:TPX.B) (NYSE:TAP) quarterly net income dropped to US$121.8 million on large European charges, but its profit increased 7.7 per cent to US$268.1 million, beating analyst expectations. Total sales decreased two per cent to US$1.17 billion. In New York, its shares rose 68 cents to US$54.69.

Commodity prices improved and gold stocks led advancers, up about 1.27 per cent while December gold rose $9.70 to US$1,317.80 an ounce. Goldcorp (TSX:G) gained 28 cents to C$26.25.

The base metals sector gained 0.9 per cent while December copper slipped two cents to US$3.25. Teck Resources (TSX:TCK.B) was ahead 26 cents to C$28.97.

The energy sector was off 0.47 per cent while December crude on the New York Mercantile Exchange gained $1.43 to US$94.80 after data showed inventories grew less than expected last week, rising by 1.6 million barrels, against the 2.5 million that had been expected.

Penn West Petroleum Ltd. (TSX:PWT) shares plunged $1.89, or 16.25 per cent, in heavy trading of 6.2 million shares after the Alberta-focused oil producer signalled it’s preparing for another transitional year as it pares down its portfolio.

Penn West also issued a flurry of announcements earlier, including a third-quarter financial report that mostly met or beat analyst estimates and a plan to sell $1.5 billion to $2 billion of assets before the end of 2014.

Traders also looked ahead to other key U.S. economic data coming out this week, including third-quarter economic growth figures Thursday and the U.S. government’s October employment report on Friday.

The data from both reports will help the Federal Reserve decide if the economy is strong enough to allow the central bank to start tapering its monthly US$85 billion of bond purchases.