Skip to main content

China's President Xi Jinping speaks at a news conference for the Asia Pacific Economic Cooperation (APEC) Summit at the International Conference Center in Yanqi Lake, north of Beijing, November 11, 2014.POOL/Reuters

The Toronto stock market advanced Friday with commodities prices and resource companies moving higher amid signs that central banks are still prepared to step up efforts to keep a fragile global economic recovery going.

The S&P/TSX composite index ran up 50.14 points to 15,125.32, its highest level in nearly two months.

China's central bank cut its interest rates and promised to inject extra credit into the financial system if needed. And the head of the European Central Bank said the ECB is willing to "step up the pressure" and broaden its efforts to stimulate the struggling euro zone economy.

The Canadian dollar also made a solid advance, up 0.57 of a cent 89.02 cents (U.S.), as higher than expected inflation during October raised speculation about when the Bank of Canada might hike interest rates. Statistics Canada said inflation rose by 0.1 per cent from September – pushing the annual inflation rate to 2.4 per cent. Economists had been looking for a drop in October.

U.S. indexes also charged ahead with the Dow Jones industrials ahead 120.6 points to 17,839.6, the Nasdaq advanced 20.99 points to 4,722.86 and the S&P 500 index climbed 13.23 points to 2,065.98.

China's central bank cut the interest rate on its one-year loans to financial institutions by 0.4 percentage point to 5.6 per cent. The country's annual rate of economic growth slowed to a five-year low of 7.3 per cent last quarter. The move by the central bank came a day after the release of data showing that Chinese manufacturing activity fell to a six-month low in November.

Many analysts think a key motivation behind China's rate cut has been the recent sharp fall in the value of the Japanese yen, which is likely to have an impact on China's exports.

And the ECB's Draghi said that if current efforts do not achieve the desired effect, the bank could "broaden even more the channels through which we intervene." For many in the markets, that's a clear hint that the bank could soon starting buying government bonds.

While China's growth has been slowing, conditions in the euro zone are much worse with the region teetering on the edge of recession, as indicated in data out Thursday from financial information company Markit. Its purchasing managers' index for the euro zone, a broad gauge of business activity, fell to a 16-month low in November.

Commodity prices shot higher Friday in the wake of the moves by the central banks.

The base metals group jumped six per cent while December copper gained four cents to $3.06 (U.S.) a pound.

January crude in New York ahead 56 cents to $76.41 a barrel and the energy sector climbed 1.7 per cent.

The gold sector gained 1.6 per cent while December bullion advanced $14.20 to $1,205.10 an ounce.

Consumer staples and telecoms led decliners.

Financials also declined with Royal Bank down 41 cents to $82.63 (Canadian) as the bank said that it will exit its international client wealth management business in the Caribbean and other international private banking groups. RBC wouldn't confirm a Financial Post report that the move could affect more than 300 brokers and private bankers. The move by RBC came as the bank prepared to post quarterly and full fiscal year earnings on Dec. 3.

Interact with The Globe