TORONTO – Assurances from China’s leadership that the government will make sure economic targets will be met helped send North American stock markets higher Tuesday and pushed New York’s Dow industrials to a record high.
The Dow closed up 125.95 points to 14,253.77, breaking through its previous record high from October 2007, after earlier hitting an intraday record of 14,286.
Toronto’s S&P/TSX composite index closed well off the highs of the session, giving up a 113-point jump to close up 28.63 points to 12,736.04. The main Toronto index still has a long way to go before hitting its old record high of 14,467 from June 30, 2008, a couple of months before the start of the financial crisis triggered by the collapse of American investment bank Lehman Bros.
Other New York indexes surged amid another sign the American housing market is gaining momentum and a strong reading from the U.S. service sector.
The Nasdaq composite index climbed 42.1 points to 3,224.13 while the S&P 500 index climbed 14.59 points to 1,539.79.
The 7.5 per cent economic growth figure reaffirmed by outgoing Chinese premier Premier Wen Jiabao is below the double-digit rates of the past decade. But it is in line with Communist Party plans for a rebalancing of the world’s second-largest economy away from reliance on trade and investment to drive growth.
Wen told the ruling Communist Party’s annual congress that the government would spend what it needs to meet the economic growth target that is part of the government’s latest five-year development plan.
“What we saw overnight was confirmation of China’s commitment to their growth strategy and I think that is the key,” said Philip Petursson, director of institutional equities at Manulife Asset Management.
The Canadian dollar edged down 0.02 of a cent to 97.28 cents US a day before the Bank of Canada makes its next announcement on interest rates. The bank could signal that interest rate hikes are even further down the road than thought because of persistent economic weakness.
In the U.S., CoreLogic, a real estate data provider, said U.S. home prices rose 9.7 per cent in January from a year earlier. That’s up from an 8.3 per cent increase in December and the biggest annual gain since April 2006. Home prices also rose 0.7 per cent in January from December.
And the Institute for Supply Management’s survey index for the service sector came in at 56, higher than the January reading of 55.2 and a full point above expectations. Any reading above 50 indicates expansion.
The positive news from China came a day after other data on Monday showed that expansion in its services sector last month was its lowest since September.
Also depressing buying sentiment Monday was a move by the Chinese government to cool surging housing prices.
Markets are usually quick to respond to positive or negative developments in China because the world’s second biggest economy has played a huge role in helping the overall global economy recover from the 2008 financial collapse and subsequent recession.
“In my mind, China has been the linchpin to global growth and… the news that the government is committed to growth, committed to expanding the deficit to support that growth increasing fiscal spending and so on says, you know what, the guy at the head of the line is going to make sure the line continues to move forward,” added Petursson.
The telecom sector helped take the TSX higher, up 0.44 per cent as telecom BCE Inc. (TSX:BCE) received regulatory approval of its proposed $3.38-billion takeover of Astral Media Inc. (TSX:ACM.A).The Competition Bureau OK’d the BCE-Astral deal with some major strings attached — the telecom company will have to sell several of Astral’s pay and specialty television channels. BCE shares gained 10 cents to $46.85 while Telus Corp. (TSX:T) advanced 42 cents to $71.47.
The bureau said that without the sale of those channels the deal would likely have led to higher prices and reduced choices for television programming. The deal still requires approval from the CRTC.
Hopes for rising demand from China helped send commodity prices higher.
The base metals sector was up 0.4 per cent while May copper on the Nymex rose one cent to US$3.51. Teck Resources (TSX:TCK.B) gained 28 cents to C$30.53 while Lundin Mining (TSX:LUN) was ahead 10 cents to $4.66.
The April crude contract on the New York Mercantile Exchange was ahead 70 cents to US$90.82 a barrel, sending the energy sector ahead 0.32 per cent. Cenovus Energy (TSX:CVE) advanced 31 cents to C$32.13.
The financial sector was up 0.4 per cent as Scotiabank (TSX:BNS) delivered quarterly earnings that beat expectations
Scotiabank had $1.63 billion of net income or $1.25 a share in the latest quarter, up 13 per cent from a year ago. Ex-items, the bank’s earnings were $1.27, two cents better than expectations. Scotiabank also hiked its quarterly dividend by three cents to 60 cents a share and its shares gained 45 cents to $61.32.
Elsewhere in the sector, Manulife Financial (TSX:MFC) up 15 cents to $15.35.
The tech sector also supported the TSX as MacDonald Dettwiler & Assoc. (TSX:MDA) were ahead $2.92 to $73.17.
The gold sector turned negative, down about 0.23 per cent on while April gold climbed $2.50 to US$1,574.90 an ounce. Alamos Gold (TSX:AGI was down 48 cents to $13.76.
Defensive sectors were also in decline with the utilities sector down 0.9 per cent as Atlantic Power (TSX:ATP) fell 24 cents to $5.82.
The TSX Venture Exchange gained 15.06 points to 1,112.23.