TSX closes higher as oil jumps, Fed fails to deliver on further stimulus

TORONTO – The Toronto stock market closed higher Wednesday with the market finding support from energy stocks on a solid jump in crude prices.

The S&P/TSX composite index closed up 32.42 points at 11,544.64. The TSX Venture Exchange gave back 6.57 points to 1,192.79.

Rising oil prices helped push the commodity-sensitive Canadian dollar up 0.26 of a cent to 98.05 cents US amid data showing a widening of the trade deficit in May.

Statistics Canada said the trade deficit with the world was $793 million, up from $623 million in April. Merchandise imports increased 0.4 per cent on the strength of energy products while exports were relatively unchanged in May.

New York markets were listless, reflecting investor disappointment that the minutes from the latest U.S. Federal Reserve meeting didn’t deliver a strong hint that another round of economic stimulus is on the way.

The minutes showed Federal Reserve policymakers agreed last month that they might need to take more action to support growth if the U.S. economy loses momentum.

They showed Fed officials signalled their concern that the struggling U.S. economy could worsen if Congress fails to avert tax hikes and across-the-board spending cuts that kick in at the end of the year.

But “on balance, the minutes do not on the surface suggest a sizeable body of support for further immediate action,” said CIBC World Markets senior economist Peter Buchanan.

“Although it should be borne in mind that the comments were made prior to recent data disappointments, including another sub-100 payrolls print in June,” he added.

The Dow Jones industrials declined 48.59 points to 12,604.53.

The Nasdaq composite index fell 14.35 points to 2,887.98 and the S&P 500 index dipped 0.02 of a point to 1,341.45.

Hopes for more action from the Fed had risen in the past week amid disappointing readings on the American manufacturing and service sectors and job creation numbers for June that were below even modest expectations.

Other central banks have moved recently to help keep the recovery on the rails.

The European Central Bank and the People’s Bank of China cut lending rates last week. But slowing trade growth in China and weak jobs creation in the U.S. have investors worried that markets could languish until the Federal Reserve implements another round of Treasury bond purchases known as quantitative easing.

But some analysts questioned the need for another round of QE.

“We thought at the end of the year they were going to come out with (more quantitative easing), not because we thought it was needed but because that was going to be the sentiment of the market because of where Europe was going to drive things,” said Gareth Watson, vice-president, investment management and research at Richardson GMP Ltd.

“Let’s be honest: what is quantitative easing? It is when a central bank steps in to provide liquidity when there is no liquidity available. And … there is no liquidity issue in the U.S. when it comes to financial institutions.”

The energy sector ran up 1.75 per cent as oil prices gained ground after weak Chinese trade data sent prices lower on Tuesday. Prices took off Wednesday after China’s auto industry said sales jumped a solid nine per cent in June despite a slowing economy. China is the world’s biggest market for new vehicles.

Also, the U.S. government said oil supplies fell last week by 4.7 million barrels, triple the decline expected by analysts, which signals higher demand.

The August crude contract on the New York Mercantile Exchange gained $1.90 to US$85.81 a barrel, pushing the energy sector up 1.75 per cent. Cenovus Energy (TSX:CVE) gained $1.03 to C$33.28 and Suncor Energy (TSX:SU) rose 53 cents to $29.25.

The consumer staples sector also made headway. Quebec-based convenience store and fuel station chain operator Alimentation Couche-Tard Inc. (TSX:ATD.B) gained $2.20 to $48.10 on top of a gain of $1.66 Tuesday in the wake of a strong earnings report.

Financials were also supportive with Manulife Financial (TSX:MFC) ahead 14 cents to $11.10 while Scotiabank (TSX:BNS) climbed 56 cents to $53.06.

The gold sector was the leading decliner, down about 2.3 per cent amid lower gold prices and a production warning from one of the biggest miners. Bullion declined $4.10 to US$1,575.70 an ounce and Barrick Gold (TSX:ABX) faded 71 cents to C$35.66.

Goldcorp Inc. (TSX:G) tumbled $3.83 or 10.18 per cent to $33.80 as the miner cut its 2012 production guidance, blaming operating delays at its Red Lake mine in Ontario and inadequate water supply at its Penasquito mine in Mexico. The Vancouver-based gold miner said it expected to produce between 2.35 and 2.45 million ounces of gold for the year, down from an earlier estimate of 2.6 million ounces.

Mining stocks were weak amid worries about a global economic slowdown.

The base metals sector dipped 0.83 per cent with copper ahead five cents at US$3.45 a pound. Ivanhoe Mines (TSX:IVN) shed 20 cents to C$8.80 and Lundin Mining (TSX:LUN) shed 12 cents to $3.99.

The telecom sector was also a weight as Telus Corp. (TSX:T) eased $1.01 to $62.23.

In corporate news, Vancouver-based miner South American Silver Corp. (TSX:SAC) is protesting Bolivia’s decision to revoke its licence to mine a rich silver deposit in the country and nationalize the project. The licence was cancelled Tuesday following opposition from Quechua Indians who had seized workers employed by the company to press their case.

The stock has lost about half its value in the last two sessions, closing Tuesday at 49 cents on the TSX. It fell another 12 cents Wednesday to 37 cents.