The Toronto stock market moved higher Wednesday morning in a broad-based recovery a day after being rattled, along with most major world markets, by an announcement from Greece that threatens to undermine a critical bailout plan.
The S&P/TSX composite index jumped 195.95 points to 12,311.05, led by rising resource stocks as commodity markets also clawed back losses. Markets were roiled Tuesday by a surprise vow from the Greek prime minister to put the country's bailout agreement to a referendum — a move some fear will kill the deal and plunge Europe into a financial tailspin.
“The truth is that when people came in this morning, they saw that Europe was hanging in there, the European markets were by and large higher,” said Norman Raschkowan, North American strategist for Mackenzie Financial Corp.
“People took some comfort from the fact that Europe has calmed down a bit, so that set sort of a positive tone for the session.”
The TSX Venture Exchange gained 31.32 points to 1,620.2.
Investors worry Greeks are fed up following a string of painful tax increases and drastic government spending cuts and will vote against an economic austerity plan, which could in turn result in havoc in the region's financial sector and even tend to push the global economy back into recession.
The Canadian dollar moved up 0.79 of a cent to 98.94 cents US in morning trading. The loonie had plunged more than two cents Tuesday after the surprise announcement by Prime Minister George Papandreou sent traders to the safe haven of the U.S. dollar.
New York markets were positive ahead of a midday announcement from the U.S. Federal Reserve on interest rates. The American central bank won't be moving rates from near zero but traders will want to look at the Fed's statement for reassurance that the U.S. will still be able to avoid slipping back into recession.
The Dow Jones industrial index gained 213.01 points to 11,870.97. The Nasdaq composite index ran up 40.51 points to 2,647.47 while the S&P 500 index was up 24.2 points to 1,242.48.
Markets were supported in part by encouraging labour news two days before the release of the U.S. non-farm payrolls report for October. Automatic Data Processing said that company payrolls rose by 110,000 in October. Most of the gains came from the service industry. ADP also revised higher its survey results for September.
The TSX fell 137 points Tuesday and the Dow gave back 297 points on the latest worries about the eurozone. The selloffs followed Papandreou's unexpected call for a public vote on the aid package just days before the leaders of the world's largest industrial and developing nations gather for the G20 economic summit in Cannes, France on Thursday and Friday.
The announcement also came just five days after European officials outlined a plan to deal with the fact that Greece cannot pay its debts on time.
The three-pronged strategy involved boosting a bailout fund, getting private creditors to take a bigger hit on their Greek debt holdings and forcing banks to raise more capital. Market optimism about the plan had already started to wear thin Monday as analysts looked for more specific details on how the plan would work.
“The only reasonable explanation for this referendum out of the blue is, since the details of what Greece would have to abide by haven't been set yet, he's hoping that this way Europe gives him a bit of a break,” added Raschkowan.
Papandreou also has to survive a confidence motion on Friday and analysts say that is by no means guaranteed. A revolt in George Papandreou's government could scuttle the Greek referendum, which would be an enormous relief to investors.
The weaker U.S. dollar helped commodity prices claw back losses from the previous session. A weaker greenback usually helps lift commodity prices, which are denominated in U.S. dollars, as it makes oil and metals more attractive to holders of other currencies.
The TSX energy sector gained 2.37 per cent as the December crude contract on the New York Mercantile Exchange gained $1.41 to US$93.60 a barrel. Suncor Energy (TSX:SU) gained 89 cents to C$31.81 while Cenovus Energy (TSX:CVE) climbed 90 cents to C$34.35.
Metal prices advanced as the December copper contract on the Nymex gained 11 cents to US$3.62 a pound, pushing the mining sector up 3.5 per cent. Teck Resources (TSX:TCK.B) advanced $1.15 to C$39.24 and First Quantum Minerals (TSX:FM) rose 91 cents to $20.64.
The gold sector rose 2.5 per cent per cent as bullion moved higher while the December gold contract in New York rose $32.30 to US$1,744.10 an ounce. Barrick Gold Corp. (TSX:ABX) rose $1.70 to C$52 and Goldcorp Inc. (TSX:G) climbed $1.39 to $51.34.
The financial sector also lifted the Toronto market, up 1.45 per cent with Manulife Financial (TSX:MFC) ahead 28 cents to $12.70 and Scotiabank (TSX:BNS) gained $1.38 to $52.45.
Several key Asian indexes were positive with Hong Kong's Hang Seng shooting up 1.9 per cent but Japan's Nikkei 225 index tumbled 2.2 per cent.
European markets were higher after steep losses Tuesday with London's FTSE 100 index ahead 0.32 per cent, Frankfurt's DAX was ahead 0.93 per cent and the Paris CAC 40 climbed 0.86 per cent.
In earnings news, Talisman Energy Inc. (TSX:TLM) shares gained 52 cents to $14.29 as it reported that its net income jumped by nearly half in the latest quarter to $521 million as the company generated from higher prices and output. Revenues rose 17 per cent to nearly $1.95 billion.
Toy maker Mega Brands (TSX:MB) saw its profits dip slightly in the third quarter on higher costs. The Montreal-based company said net earnings fell to US$17.1 million compared to $17.4 million a year earlier. Sales rose to $133.4 million from $128.3 million. Its shares were 15 cents higher at $8.65.
Newspaper publisher Torstar Corp. (TSX:TS.B) said Wednesday its third quarter net profits jumped by 74 per cent to $25.2 million. Revenue at the owner of the Toronto Star newspaper, the Harlequin book publisher and other media properties said revenue increased to $378.7 million from $353.7 million and its shares were ahead 16 cents to $10.34.
Canadian-American beer producer Molson Coors (TSX:TAP) (NYSE:TAP) said third-quarter net income tumbled 23 per cent to US$197.4 million because of higher costs, the poor economy in the United States and surprisingly weak sales in the U.K. Its shares were down $1.34 to US$38.99 in New York.