TSX Ends Sharply Higher As Fed Moves To Taper - Canadian Commentary

(RTTNews) - Canadian stocks ended at a near one-week high Wednesday, after the U.S. Federal Reserve said it would begin tapering its quantitative easing program with a $10 billion cut to the monthly bond-buying beginning January, but left its interest rates untouched at the existing low. Almost all major sub-indices of the main index ended in positive territory with the exception of the global gold index.

The Federal Reserve on Wednesday tapered its massive bond-buying program by $10 billion to $75 billion per month, citing recent improvement in the U.S. jobs market. Beginning in January, the Fed will buy mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month.

Policy makers expect to see sustained jobs creation and an uptick in the rate of inflation before further scaling back their unprecedented support measures. It was stated that any additional reduction in the size of QE3 will be contingent on economic data.

Global equity markets had been expected to take a dive as and when the Fed decided to slash its stimulus program, but most markets sustained an upward trend.

The S&P/TSX Composite Index closed Wednesday at 13,334.73, up 154.57 points or 1.17 percent. The index scaled an intraday high of 13,358.10 and a low of 13,180.16.

U.S. crude oil moved up to end at a one-week high Wednesday, after the Federal Reserve decision and on a report from the Energy Information Administration that showed U.S. crude oil stockpiles to have dropped last week, albeit less than expected.

Data from the Energy Information Administration revealed that US crude oil inventories dipped 2.90 million barrels, while gasoline stocks added 1.30 million barrels in the week ended December 13. Analysts expected crude oil inventories to drop by 3 million barrels and gasoline stocks to gain 1.5 million barrels last week.

The Energy Index gained 1.48 percent, with U.S. crude oil futures for January delivery, the most actively traded contract, adding $0.58 or 0.6 percent to close at $97.80 a barrel Wednesday on the Nymex.

Among energy stocks, Canadian Natural Resources Limited (CNQ.TO) added 1.71 percent while Suncor Energy Inc. (SU.TO) gained 2.51 percent. Talisman Energy Inc. (TLM.TO) gathered 0.74 percent, while Encana Corp. (ECA.TO) added 0.79 percent.

The Information Technology Index added 0.30 percent, although smartphone maker BlackBerry Limited (BB.TO) slipped 0.15 percent.

The Diversified Metals & Mining Index added 1.15 percent, with First Quantum Minerals Ltd. (FM.TO) jumping 3.05 percent and Lundin Mining Corp. (LUN.TO) surging 3.70 percent. Teck Resources Limited (TCK.B.TO) rose 1.19 percent, while Osisko Mining Corporation (OSK.TO) gained 2.20 percent.

The Capped Materials Index moved up 0.31 percent. Fertilizer maker, Potash Corp. (POT.TO) gained 0.96 percent, while Agrium Inc. (AGU.TO) moved up 0.40 percent.

Gold futures ended marginally higher on Wednesday, just before the outcome of the two-day U.S. Federal Reserve policy review meet.

The Global Gold Index fell 0.45 percent, with gold futures for February delivery, the most actively traded contract, gaining $4.90 or0.4 percent to close at $1,235.00 an ounce Wednesday on the Nymex.

Among gold stocks, Kinross Gold Corp. (K.TO) slipped 1.64 percent, while Barrick Gold Corp. (ABX.TO) dropped 0.82 percent. Yamana Gold Inc. (YRI.TO) added 0.22 percent.

The Financial Index jumped 1.34 percent with Bank of Montreal (BMO.TO) up 0.77 percent, and Royal Bank of Canada (RY.TO) soaring 1.60 percent. The Bank of Nova Scotia (BNS.TO) jumped 1.20 percent and Toronto-Dominion Bank (TD.TO) surged 1.67 percent.

The Capped Industrials Index added 1.24 percent, with Bombardier Inc. (BBD.A.TO, BBD.B.TO) gaining 1.1.10 percent.

Enterprise software company Enghouse Systems Ltd (ESL.TO) gained 0.81 percent after reporting improved fourth-quarter net income of C$9.7 million or C$0.36 per share compared to C$8.3 million or C$0.32 per share last year. Analysts estimated earnings of C$0.25 per share for the quarter.

In economic news, Statistics Canada said wholesale sales increased 1.4 percent to $50.5 billion in October, snapping its two-month weak trend. Higher sales were reported in five of seven sub-sectors, representing over 70 percent of wholesale sales. In volume terms, wholesale sales were up 1.2 percent.

From the U.S., the Commerce Department said housing starts surged up 22.7 percent to a seasonally adjusted annual rate of 1.091 million in November from a rate of 889,000 in October. Economists had expected housing starts to come in at an annual rate of 955,000.

From the eurozone, German business sentiment improved in December in line with economists' expectations survey results published by the Ifo Institute revealed. The headline business climate index rose to 109.5 in December from 109.3 in November. The reading matched economists' forecasts.

Meanwhile, the U.K. claimant count fell slightly to 3.8 percent in November from 3.9 percent in October, the Office for National Statistics said. The rate matched economists' expectations. The number of people claiming Jobseeker's Allowance fell by 36,700 to 1.27 million, the lowest figure since January 2009. Economists were expecting a fall of 35,000.

Elsewhere, policymakers of the Bank of England unanimously decided to maintain the interest rate at 0.50 percent and quantitative easing at GBP 375 billion, the minutes of the meeting held on December 4 and 5 showed.