The plan by the European Central Bank to buy up government bonds raised hopes that greater financial stability in Europe will help the region get out of its economic slump, hopefully hike demand for oil and metals and send shares prices higher on the resource-intensive TSX.
“Any indication of stability is positive, is viewed that we can get things back on track and get global economic growth back into a positive trajectory,” said Jennifer Dowty, portfolio manager at Manulife Asset Management.
Surging copper and a weak U.S. currency also helped push the Canadian dollar up 0.48 of a cent to 102.23 cents (U.S.) as Statistics Canada said the economy created 34,300 jobs in August. That was much better than the approximately 10,000 new jobs that economists had expected.
The U.S. Labor Department reported that only 96,000 jobs were created in August, less than the 125,000 that had been forecast. The jobless rate edged down to 8.1 per cent from 8.3 per cent but that was because of fewer people looking for work.
And to top it all off, the department said 41,000 fewer jobs had been created in June and July than previously reported.
The S&P 500 index gained 5.8 points to 1,437.92.
“The market is certainly betting on it, suggesting if we don’t see action next week it will certainly create some volatility.”
The plan amounts to a commitment to buy unlimited amounts of short-term bonds from euro countries that request help. Ostensibly, the plan is meant to ease the financial pressures on Spain and Italy by giving them time to reduce debt and reform their economies.
The ECB had been under pressure to take action after Spain and Italy became the latest countries forced to pay yields in the seven per cent range on their benchmark 10-year bonds earlier this year, a level that raised worries that they could be forced to seek bailouts.
The ECB plan seemed to be working as Spain has seen its cost of borrowing fall since the announcement. The yield on Spain’s 10-year bond fell another 0.21 percentage point to 5.80 per cent on Friday, the first time it’s gone below six per cent since May.
Investors think Spain will make a formal request to tap the new program within weeks, which could ease the pressures in the eurozone’s fourth-largest economy.
TSX gains were led by an eight per cent rise in the base metals sector as September copper ran ahead 13 cents to $ 3.65 (U.S.) a pound. Teck Resources gained $ 2.48 to $ 29.51 (Canadian) while First Quantum Minerals jumped $ 1.95 to $ 21.92.
The gold sector rose over two per cent as bullion prices turned positive on the prospect the U.S. Federal Reserve will decide on another round of quantitative easing, which would see the central bank print more money to buy bonds. December gold was up $ 34.90 to $ 1,740.50 (U.S.) an ounce and Barrick Gold Corp. rose 99 cents to $ 39.27 (Canadian) while Goldcorp Inc. improved by 70 cents to $ 42.06.
The energy sector rose just over two per cent as the October crude contract on the New York Mercantile Exchange gained 89 cents to $ 96.42 (U.S.) a barrel. Suncor Energy climbed 74 cents to $ 32.59 (Canadian) while Cenovus Energy rose 92 cents to $ 34.22.
The ECB move helped push the TSX up 319 points or 2.66 per cent this week.
In corporate news, Garda World Security Corp. has agreed to be taken over in a $ 1.1-billion deal that would see the company taken private. Garda say a consortium formed by Stephan Cretier, its founder, chairman and CEO, and a subsidiary of funds advised by global private equity firm Apax Partners, is offering $ 12 per share in cash. That represents a 30 per cent premium over the closing price of the company’s class A shares on Thursday. Its shares were halted Friday morning but at mid-afternoon had surged $ 2.74 or 29.78 per cent to $ 11.94.
Lululemon Athletica Inc. reported quarterly net earnings were $ 57.2 million or 39 cents per share. That compared with net earnings of $ 38.4 million or 26 cents per share in the second quarter of fiscal 2011. The Vancouver-based activewear retailer also reported revenue up 33 per cent to $ 282.6 million. It also raised its full year revenue projection and its stock rose $ 8.11 or 12.03 per cent to $ 75.50.
Intel is cutting its third-quarter revenue forecast due to softer than expected demand for its chips amid difficult economic conditions. Intel chips go into about 80 per cent of personal computers and into a vast number of servers as well, making it a bellwether for spending on computers. Its stock fell 90 cents to $ 24.19 (U.S.).