TSX Ends Sharply Higher On Rate Cut, ECB Hopes -- Canadian Commentary

(RTTNews) - Canadian stocks ended sharply higher on Wednesday, after the Bank of Canada revealed an unexpected interest rate cut amid plunging crude oil prices and on news reports indicating a definite proposal before the European Central Bank for additional stimulus.

A Wall Street Journal report, citing people familiar with the matter, said a new bond-buying program has been proposed for the eurozone economy, with monthly bond purchases of about 50 billion euros or US$58 billion for a minimum period of one year.

The ECB has been stubbornly holding off on full-scale quantities easing until now, but some dreadful economic data and the threat of deflation could see some additional stimulus on Thursday.

Investors expect the outcome of Thursday's European Central Bank monetary policy meet to be positive, anticipating the ECB to expand its quantitative easing program, particularly after last week's surprise move by the Swiss National Bank.

The Canadian central bank lowered its interest rate by a quarter of a percentage point to 0.75 percent, from 1.00 percent. The rate has been unchanged since September 2010.

Canada is the largest exporter of oil to the U.S. and its oil industry has been severely impacted as a result of plummeting oil prices. Oil prices have shed over 10 percent this year, after having dropped more than 50 percent last year.

The Organization of the Petroleum Exporting Countries have remained stubborn and refused to cut production in an effort to push U.S. producers down, even as the country continues to produce crude at the fastest rate in more than three decades.

OPEC's strategy of derailing the U.S. shale oil industry may be starting to work. BHP this morning said it would cut shale output, and a number of major names in the energy sector have slashed jobs in anticipation of fewer projects this year.

Energy stocks are rebounded Wednesday as crude prices rallied to end sharply higher. Oil prices dropped below $47 per barrel yesterday, but gained a near 3 percent to end near $48 a barrel earlier today. Meanwhile, gold stocks dropped as the precious metal reversed early gains to end a tad lower.

Investors are also focused on the results of the Greek elections on Sunday and well as the geopolitical tensions in Ukraine, with reports of extending fighting emerging in news reports with the involvement of Russian troops.

The benchmark S&P/TSX Composite Index closed Wednesday at 14,560.42, up 251.98 points or 1.76 percent. The index scaled an intraday high of 14,624.24 and a low of 14,266.24.

On Tuesday, the index closed down 4.06 points or 0.03 percent, at 14,308.44. The index scaled an intraday high of 14,377.63 and a low of 14,260.43.

Crude oil rebounded to end higher ahead of the European Central Bank meet outcome on Thursday, even as news reports indicate a definite proposal before the central bank for the introduction of additional stimulus.

The Energy Index jumped 3.15 percent, with U.S. crude oil futures for March delivery, gaining $1.31 or 2.8 percent, to settle at $47.78 a barrel on the New York Mercantile Exchange Wednesday.

Among energy stocks, Pacific Rubiales Energy Corp. (PRE.TO) added 0.84 percent, Talisman Energy Inc. (TLM.TO) moved up 1.43 percent, Canadian Natural Resources Limited (CNQ.TO) slipped 0.67 percent, Suncor Energy Inc. (SU.TO) added 4.80 percent, and Canadian Oil Sands Limited (COS.TO) gained 3.51 percent.

Encana Corp. (ECA.TO) gained 4.45 percent, Crescent Point Energy (CPG.TO) added 2.29 percent and Cenovus Energy Inc. (CVE.TO) gathered 3.26 percent.

The Diversified Metals & Mining Index surged 5.67 percent, as First Quantum Minerals Ltd. (FM.TO) jumped 6.19 percent, and Lundin Mining Corp. (LUN.TO) advanced 6.51 percent.

Teck Resources Limited (TCK.B.TO) jumped 8.40 percent, Finning International Inc. (FTT.TO) gathered 3.56 percent, and HudBay Minerals (HBM.TO) surged 8.15 percent.

Gold futures snapped a seven-day gain to end a tad lower on Wednesday, after fluctuating for much of the day amid speculation that the European Central Bank will embark on a full-scale quantitative easing at the close of its meeting Thursday.

The Global Gold Index added 0.67 percent, with gold for February delivery dipping $0.50 to settle at $1,293.70 on the New York Mercantile Exchange Wednesday.

Eldorado Gold Corp. (ELD.TO) plummeted 18.60 percent, after its 2015 guidance showed it expects to produce lesser ounces of gold and also at a higher cost than incurred last year.

Among other gold stocks, Yamana Gold Inc. (YRI.TO) shed 2.20 percent, Kinross Gold Corp. (K.TO) slipped 0.23 percent, Barrick Gold Corp .(ABX.TO) gained 3.36 percent, and Franco-Nevada Corp. (FNV.TO) shed 0.59 percent.

Goldcorp (G.TO) gained 2.69 percent. The company announced an agreement to purchase around 7.32 million shares of Probe Mines Ltd. (PRB.V) and about 2.35 million warrants to buy common shares of Probe from Agnico Eagle Mines (AEM.TO) for C$5.00 per share and C$2.90 per warrant for an aggregate purchase price of nearly C$43 million. Agnico Eagle Mines inched up 0.05 percent.

B2Gold (BTO.TO) dropped 2.53 percent after reporting fourth quarter consolidated gold revenue of $122.4 million compared to $138.1 million last year.

The Capped Materials Index gained 1.72 percent, mostly on rising gold stocks, with Potash Corp. of Saskatchewan Inc. (POT.TO) adding 2.97 percent.

The heavyweight Financial Index jumped 1.49 percent, as National Bank of Canada (NA.TO) inched up 0.16 percent, Toronto-Dominion Bank (TD.TO) gained 1.05 percent, and Bank of Nova Scotia (BNS.TO) added 1.91 percent.

Royal Bank of Canada (RY.TO) gathered 1.67 percent, while Bank of Montreal (BMO.TO) advanced 1.65 percent. Canadian Imperial Bank of Commerce (CM.TO) added 1.74 percent.

The Capped Industrials Index added 1.48 percent, as Bombardier Inc. (BBD.B.TO) fell 5.71 percent even as Elix Aviation Capital Limited indicated taking an assignment of three Q400 NextGen turboprop aircraft previously booked by an existing Bombardier customer. Air Canada (AC.TO) dived 4.93 percent.

The Information Technology Index moved up 0.75 percent, with BlackBerry Limited (BB.TO) up 1.07 percent, Sierra Wireless (SW.TO) down 1.66 percent and Constellation Software (CSU.TO) down 0.26 percent.

The Healthcare Index advanced 1.80 percent, as Valeant Pharmaceuticals International, Inc. (VRX.TO) added 2.53 percent and Catamaran Corp. (CCT.TO) gained 3.06 percent.

The Capped Telecommunication Index dropped 1.68 percent, with Manitoba Telecom Services Inc. (MBT.TO) plunging 5.70 percent, Rogers Communications Inc. (RCI.B.TO) shedding 0.97 percent, and TELUS Corporation (T.TO) surrendering 0.42 percent.

EnerCare (ECI.TO) shed 0.63 percent, after having declared a January cash dividend of $0.0604 per share.

On the economic front, Statistics Canada announced Wednesday that wholesale sales for November dropped by 0.3 percent to C$54 billion. This was the first decrease reported in 11 months. The unexpected drop was due to weakness in industrial equipment and building materials. Economists had expected no change in sales.

On the economic front, new residential construction in the U.S. saw a significant increase in December with housing starts nearly offsetting the drop seen in the previous month, a report from the Commerce Department showed Wednesday,.

The report said housing starts jumped 4.4 percent to an annual rate of 1.089 million in December after tumbling 4.5 percent to a revised 1.043 million in November. Economists expected housing starts to climb 1.3 percent to 1.041 million in December from the 1.028 million originally reported for the previous month.

Meanwhile, the report also said building permits fell 1.9 percent to an annual rate of 1.032 million in December from the revised November rate of 1.052 million. Building permits, an indicator of future housing demand, had been expected to climb 2.4 percent to 1.060 million from the 1.035 million originally reported for the previous month.

The U.K. unemployment rate fell to a six-year low in the September to November period but the fall in unemployment was the slowest since September 2013, data from the Office for National Statistics showed Wednesday.

The jobless rate in U.K. dropped to 5.8 percent during the September to November period from 6 percent in the June to August period. Economists had forecast a rate of 5.9 percent. This was the lowest rate since August 2008.

The leading index for Germany increased in November, figures from the Conference Board showed Wednesday. The leading index rose 0.4 percent month-over-month in November, reversing the 0.1 percent decline in October.

The Bank of England's rate-setting body unanimously decided to leave the key rate unchanged for the first time since August after two policymakers abandoned their call for a rate hike. The Monetary Policy Committee voted 9-0 to retain the base rate at 0.50 percent, the minutes showed Wednesday. All members were also in favor of maintaining the size of quantitative easing at GBP 375 billion.

Eurozone house prices increased for the second straight quarter in the three months to September 2014, preliminary data from Eurostat showed Wednesday. House prices rose 0.6 percent quarter-on-quarter, slower than a 0.9 percent increase in the previous three months. House prices in the EU grew 1.1 percent in the third quarter from the previous three months and rose 2.3 percent from the corresponding period of the previous year.

Meanwhile, the Bank of Japan also kept its monetary policy unchanged and lowered its near-term inflation forecast as falling oil prices hamper efforts to lift inflation. The bank voted to maintain its monetary base at an annual pace of about JPY 80 trillion.