By Wojtek Dabrowski
Reuters
Wednesday, August 16, 2006

Also published in:

TORONTO (Reuters) - Toronto stocks moved higher on Wednesday as tame U.S. consumer price data calmed interest rate and inflation worries, sending equities on a broad rally.

Adrian Mastracci, investment counsel at Vancouver’s ‘fee-only’ KCM Wealth Management, says, “The fears are subsiding somewhat -- but I still think we have to be cautious.”

The Toronto Stock Exchange's S&P/TSX composite index finished ahead 53.10 points, or 0.44 percent, at 12,030.25.

The S&P/TSX 60 index of Canadian bluechip names rose 3.03 points, or 0.45 percent, to 682.27.

The gains came after news that core U.S. consumer prices, which serve as an inflation gauge, rose 0.2 percent in July, breaking a four-month series of 0.3 percent increases and coming in lower than expected.

The data bolstered views that the U.S. Federal Reserve may not raise interest rates next month, spurring equities higher.

"At this moment, the name of the game is still finding where the economy and inflation are going," said Luc Girard, director of the portfolio advisory group at Desjardins Securities.

He added that the U.S. inflation and producer-price data released over the past two days "suggest that both are slowing, which is very good for interest-sensitive stocks like the financials."

However, Adrian Mastracci, president at KCM Wealth Management Inc. in Vancouver, suggested that despite the relatively soft inflation indicators, the U.S. Fed may still raise rates once more.

"I think the data is a little more benign, so investors are probably saying, 'Hey, it's not quite as bad as we thought.' The fears are subsiding somewhat -- but I still think we have to be cautious," he said.

"Expect another one. If you don't get it, it's a bonus -- it would be nice not to have another rate increase."

Investors also overlooked a continuing decline in the price of crude oil on Wednesday, instead focusing on the broader macroeconomic picture. U.S. light sweet crude for September delivery fell $1.16 a barrel to $71.89, sliding for a third straight session.

"We're all focusing on the ... economy itself," Girard said. "If you have only a slowdown and you don't have a recession, that will bode very well for the TSX."

Among the day's biggest net gainers was Mosaid Technologies Inc., which shot up 14 percent, or C$3.15, to close at C$25.50 after one of its shareholders demanded the company hire bankers and put itself up for sale.

Teck Cominco Ltd. rose C$2.21, or 2.8 percent, to C$82.02 after it said it was unable to raise C$5.725 billion in an equity financing in order to sweeten its bid for nickel miner Inco Ltd. Inco fell C$3.20, or 3.8 percent, to C$86.55 as a result, making it the day's biggest net loser.

The Toronto composite's rally was broad, with eight of its 10 main groups rising. They key materials group, home to golds and base metals miners, rose 0.69 percent, while energy issues fell 0.5 percent with declining crude prices. Interest-rate sensitive financials gained 0.89 percent.

Volume was 276 million shares worth C$5.9 billion. Advancers comfortably topped decliners 853 to 659.

U.S. markets also ended higher, with the Dow Jones industrial average gaining 96.86 points, or 0.9 percent, to 11,327.12, while the tech-laden Nasdaq composite jumped 34.53, or 1.6 percent, to 2,149.54.

($1=$1.12 Canadian)

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