Stocks rise even as European Central Bank fails to offer fresh stimulus

TORONTO - The Toronto stock market added to the strong surge of the previous session Wednesday amid rising commodity prices and diminished hopes that the European Central Bank will take decisive action to deal with a worsening European debt crisis.

The S&P/TSX composite index gained 110.86 points to 11,618.57 while the TSX Venture Exchange was up 20.27 points to 1,305.84.

Traders also took in a major shakeup of the senior management at Canada’s biggest gold company, which has been disappointed by its stock performance.

Barrick Gold Corp. (TSX:ABX) says Aaron Regent has been replaced as president and chief executive officer by Jamie Sokalsky, who was the Toronto-based company’s chief financial officer. Barrick stock gained 79 cents at $44.49, down sharply from its 52-week high of $55.36.

The Canadian dollar was up 0.37 of a cent to 96.71 cents US after going as high as 96.97 cents US.

U.S. markets also advanced with the Dow Jones industrials up 111.63 points to 12,239.58.

The Nasdaq composite index gained 32.55 points to 2,810.66 and the S&P 500 index was ahead 12.41 points to 1,297.91.

The European Central Bank said earlier in the day that it was keeping its key rate unchanged at one per cent.

That had been expected but there had been hopes ECB President Mario Draghi would also indicate the bank is prepared to cut the rate next month to stimulate a weakening eurozone economy and at the same time approve more stimulus measures in an effort to spur governments to take action themselves.

But Draghi has said the central bank cannot make up for inaction by governments.

Analysts say the bank is now likely to see what European leaders can come up with at a summit at the end of this month.

This could include moves toward stronger oversight of banks, help for Spain and its troubled banks, or proposals for more growth or shared government borrowing.

Draghi also told a news conference Wednesday that economic activity in the region "remains weak, with heightened uncertainty weighing on confidence" but he didn't signal that the ECB is prepared to intervene.

Markets have been whipsawed over the last month by growing worries about the eurozone debt crisis, including the possibility that Greece could be forced to leave the monetary union. But concerns have greatly increased in recent days about the health of Spanish banks, which are loaded with billions of toxic loans as a result of the collapse of the country's housing sector.

Spain needs money to rescue its ailing banks, but can currently only receive such aid from the EU in a government bailout package. Madrid adamantly wants to avoid such a solution, as it would mean fellow eurozone countries and the International Monetary Fund would be allowed to impose fiscal policies on the country.

The country has been forced to pay higher interest rates on its debt, coming close last week to the seven per cent level which is widely viewed as unsustainable.

The yield on Spain’s key 10-year bond edged down to 6.24 per cent Wednesday morning on hopes the European Union may be moving closer toward adopting measures that could alleviate the country’s financial crisis.

There are also hopes that the U.S. Federal Reserve might provide more stimulus to its economy, supporting confidence in the global economy.

The TSX energy sector advanced 1.4 per cent as commodity prices moved higher but were also off the best levels of the day with the July crude contract on the New York Mercantile Exchange up 84 cents to US$85.13 a barrel. Prices have been buffeted over the past few weeks as the worsening eurozone crisis has stalled an already fragile global economic recovery with commodities hitting multi-month lows. Suncor Energy (TSX:SU) gained 42 cents to $28.72.

Prices for copper, viewed as an economic bellwether as it is used in so many applications, jumped six cents to US$3.35 a pound and the base metals sector gained 2.55 per cent. Teck Resources (TSX:TCK.B) rose $1 to $32.41.

The gold sector climbed 1.35 per cent

as bullion prices also improved with the August contract ahead $21.60 to US$1,638.50 an ounce. Goldcorp Inc. (TSX:G) gained 57 cents to $42.35.

Financials were also supportive, up 0.63 per cent as Royal Bank (TSX:RY) moved ahead 48 cents to $50.86.

All sectors were positive save for slight declines in health care and telecoms.

The TSX ran ahead 171 points Tuesday in a rally that also spread across all sectors following a drop of almost two per cent last week that left the market down about 10 per cent from the highs of 2012 from late February.

On the economic front, U.S. worker productivity fell by the largest amount in a year from January through March, dropping at an annual rate of 0.9 per cent in the first quarter. That’s faster than the 0.5 per cent annual decline first estimated last month. Productivity is the amount of output per hour of work. It fell at a faster rate than first estimated because revisions showed less output and slightly more hours worked.

European bourses were also off their best levels after the Draghi news conference with London's FTSE 100 index up 1.05 per cent, Frankfurt's DAX ran ahead 0.85 per cent and the Paris CAC 40 advanced 1.07 per cent.

In Asia, Japan’s Nikkei 225 rose 1.8 per cent, Hong Kong’s Hang Seng added 1.4 per cent, Australia’s S&P/ASX 200 edged up 0.3 per cent, still buoyed by the Reserve Bank of Australia’s decision Tuesday to cut interest rates by a quarter percentage point.

Markets in Singapore, Indonesia and Taiwan also moved higher, but those in mainland China fell. Markets in South Korea were closed for a public holiday.