TSX up amid manufacturing data, major dealmaking; traders look to Fed meeting

TORONTO – The Toronto stock market closed higher Monday amid strong manufacturing data from the United States and Europe and major corporate acquisitions.

Traders also looked ahead to the major economic event of the week — the U.S. Federal Reserve’s meeting Wednesday when markets may find out what the central bank intends to do about cutting back on a key area of stimulus.

The S&P/TSX composite index gained 58.71 points to 13,184.41 while rising commodities helped push the Canadian dollar ahead 0.08 of a cent to 94.46 cents US.

U.S. indexes were up sharply as investors wait to see if the Fed will start to taper its monthly US$85 billion of bond purchases.

The Dow Jones industrials ran ahead 129.21 points to 15,884.57, the Nasdaq rose 28.54 points to 4,029.52 and the S&P 500 index climbed 11.22 points to 1,786.54.

Speculation about Fed intentions has grown considerably over the past couple of weeks in the wake of a string of strong economic data, particularly a solid employment report for last month. Also, a bipartisan committee struck a U.S. congressional budget bill, which would remove the threat of another government shutdown.

However, there are many in the markets who think the Fed will want to consider more economic data before making the decision to taper. And analysts point out that with inflation only running at an annualized rate of 1.1 per cent in the fourth quarter, such weak price pressure could also serve to keep the Fed sidelined.

“Inflation prints continue to miss,” said Stephen Lingard, managing director, Franklin Templeton Multi-Asset Strategies.

“The backdrop is, it’s still a very deflationary world and that may be the only thing at this point that prevents the Fed and other central banks from starting to taper.”

Many traders aren’t happy to see an end to the asset purchases as they have kept long-term rates low and supported a strong advance on many markets this year.

The TSX tech sector was ahead 1.5 per cent and Constellation Software Inc. (TSX:CSU) jumped $10.19 or 5.2 per cent to $206.69 as it said it will pay the equivalent of about C$350 million to acquire Dutch software company Total Specific Solutions (TSS) BV.

Elsewhere in the group, BlackBerry shares rose 13 cents to $6.55 amid two high-level departures at the smartphone maker (TSX:BB). BlackBerry’s executive vice-president in charge of global sales, Rick Costanzo, will be leaving the company by early next year. And Chris Wormald, who was in charge of BlackBerry’s mergers and acquisitions strategy, will be gone by the end of this month. BlackBerry posts earnings on Friday.

The health sector was up 1.35 per cent as Valeant Pharmaceuticals International Inc. (TSX:VRX) announced a friendly deal to acquire Solta Medical Inc., a California-based company that makes medical devices used in cosmetic surgery procedures. Its offer of US$2.92 per share for all of Solta’s stock is valued at US$250 million. Valeant shares ran ahead $4.45 to $117.52.

The financials sector rose 0.65 per cent as Royal Bank (TSX:RY) climbed 77 cents to $69.

The gold sector was ahead about 0.8 per cent while February gold added $9.80 to US$1,244.40 an ounce as traders weighed the chances of Fed easing. Barrick Gold (TSX:ABX) improved by 29 cents to C$18.05.

Other commodity prices advanced as U.S. factory production rose a solid 0.6 per cent in November, led by a surge in auto output.

Financial information company Markit says its purchasing managers index for the eurozone beat expectations, rising to a 31-month high of 52.7 from 51.6 in November. At the same time, the services PMI slipped to a four-month low of 51 from 51.2.

Other data showed that China’s manufacturing sector grew at a slightly slower pace in December, according to a preliminary survey by HSBC. Its flash purchasing managers’ index slowed to a three-month low of 50.5.

The base metals sector was flat as March copper added two cents to US$3.33 a pound.

The energy sector was down 0.22 per cent as the January crude contract on the New York Mercantile Exchange gained 88 cents to US$97.48 a barrel. Canadian Natural Resources (TSX:CNQ) gave back 39 cents to C$33.96.

The interest rate sensitive utilities sector was the biggest drag, down 0.5 per cent. The component has been under pressure since outgoing Fed chairman Ben Bernanke first mentioned the possibility of phasing out the latest effort at quantitative easing. Those comments had the effect of increasing U.S. bond yields with the benchmark 10-year Treasury rising from about 1.6 per cent at the end of April to 2.88 per cent Monday. Fortis (TSX:FTS) declined 36 cents to $29.76.