TSX Ends Higher On ECB Stimulus Move -- Canadian Commentary

(RTTNews) - Canadian stocks ended sharply higher on Thursday, extending gains from its previous session after the Bank of Canada revealed an unexpected interest rate cut amid plunging crude oil prices and on the European Central Bank's announcement of a massive monetary stimulus package earlier today that was larger than market expectations.

Almost all sectors of the market ended in positive territory on Thursday, with the exception of the Diversified Metals & Mining Index.

Markets in the United States, Europe, and Asia also ended in the green, after the stimulus announcement from the European Central Bank monetary policy meeting.

The ECB announced the launch of an "expanded asset purchase program" with combined monthly purchases of 60 billion euros or $70 billion, through at least the end of September 2016. ECB President Mario Draghi said the stimulus package will help push inflation back toward 2 percent in late 2015.

Under the ECB plan, the combined monthly purchases of public and private sector securities will amount to EUR 60 billion. The size of monthly asset purchases exceeded the EUR 50 billion reported in the press since Wednesday. The purchases are slated to begin in March and are intended to be carried out until the end of September 2016.

The ECB also kept its main interest rate unchanged on Thursday, with the main refinancing rate at 0.05 percent, and the rate on its marginal lending facility at 0.30 percent.

The benchmark S&P/TSX Composite Index closed Thursday at 14,763.98, up 203.56 points or 1.40 percent. The index scaled an intraday high of 14,792.49 and a low of 14,589.46.

On Wednesday, the index closed up 251.98 points or 1.76 percent, at 14,560.42. The market rallied sharply higher yesterday after the Bank of Canada unexpectedly 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.

Crude oil tumbled to end lower after a weekly official oil report from the Energy Information Administration showed crude stockpiles in the U.S. to have surged much more than expected last week, to an 80-year high.

A report from the U.S. Energy Information Administration showed crude oil inventories in the U.S. to have surged 10.1 million barrels in the week ended January 16, while analysts anticipated an increase of 2.5 million barrels.

The EIA report showed U.S. crude oil inventories at 387.9 million barrels end last week, which is the highest in over 80 years for this time of the year. The massive inventories were attributed to lower refinery runs, with U.S. crude production stable at 9.2 million barrels a day.

Gasoline stocks increased by 0.6 million barrels last week, with analysts anticipating an increase of 1.1 million barrels. Inventories of distillate, including heating fuel, dropped 3.3 million barrels, while analysts expected an increase of 0.2 million barrels.

The Energy Index gained 0.88 percent, with U.S. crude oil futures for March delivery, plunging $1.47 or 3.1 percent, to settle at $46.31 a barrel on the New York Mercantile Exchange Thursday.

Among energy stocks, Pacific Rubiales Energy Corp. (PRE.TO) added 3.59 percent, Talisman Energy Inc. (TLM.TO) moved up 0.97 percent, Canadian Natural Resources Limited (CNQ.TO) gained 1.14 percent, Suncor Energy Inc. (SU.TO) added 1.79 percent, and Canadian Oil Sands Limited (COS.TO) advanced 0.52 percent.

Encana Corp. (ECA.TO) gained 0.61 percent, Crescent Point Energy (CPG.TO) shed 1.12 percent and Cenovus Energy Inc. (CVE.TO) gathered 1.62 percent.

The Diversified Metals & Mining Index slipped 0.08 percent, as First Quantum Minerals Ltd. (FM.TO) dropped 2.95 percent, and Lundin Mining Corp. (LUN.TO) advanced 1.97 percent.

Teck Resources Limited (TCK.B.TO) added 0.63 percent, Finning International Inc. (FTT.TO) inched up 0.05 percent, and HudBay Minerals (HBM.TO) fell 1.63 percent.

Gold futures rebounded to end modestly higher on Thursday, after the European Central Bank announced a massive monetary stimulus package that was larger than market expectations.

The Global Gold Index added 0.14 percent, with gold for February delivery gaining $7.00 or 0.5 percent, to settle at $1,300.70 on the New York Mercantile Exchange Thursday.

Among other gold stocks, Yamana Gold Inc. (YRI.TO) shed 1.12 percent, Kinross Gold Corp. (K.TO) added 1.60 percent, and Barrick Gold Corp .(ABX.TO) gained 1.15 percent.

Goldcorp (G.TO) shed 0.33 percent, B2Gold (BTO.TO) dropped 3.33 percent, Eldorado Gold Corp. (ELD.TO) gained 1.83 percent, and Franco-Nevada Corp. (FNV.TO) gathered 0.29 percent.

IAMGOLD (IMG.TO) slipped 1.53 percent after the announcement of its preliminary operating results for 2014 and guidance for 2015. Revenue for 2014 was $1.2 billion compared to $1.1 billion in 2013.

The Capped Materials Index gained 0.81 percent, mostly on rising gold stocks, with Potash Corp. of Saskatchewan Inc. (POT.TO) adding 1.17 percent.

Meanwhile, Agrium Inc. (AGU.TO) jumped 5.60 percent, after announcing an increase in its target dividend payout ratio to between 40 percent and 50 percent of free cash flow, up from the previous target of 25 percent to 35 percent of free cash flow.

The heavyweight Financial Index moved up 0.78 percent, as National Bank of Canada (NA.TO) dropped 0.89 percent, Toronto-Dominion Bank (TD.TO) gained 1.75 percent, and Bank of Nova Scotia (BNS.TO) added 1.58 percent.

Bank of Montreal (BMO.TO) advanced 1.54 percent, while the Canadian Imperial Bank of Commerce (CM.TO) gained 0.46 percent.

Royal Bank of Canada (RY.TO) surrendered 2.48 percent, after agreeing to acquire City National Corp. for $93.80 per share, aggregating an approximate $5.4 billion.

The Capped Industrials Index rose 1.75 percent, as Bombardier Inc. (BBD.B.TO) jumped 4.92 percent and Air Canada (AC.TO) adding 1.44 percent.

Canadian Pacific Railway (CP.TO) fell 0.27 percent, after reporting fourth quarter adjusted net income of C$2.68 per share compared to last year's C$1.91 per share. Analysts expected earnings of C$2.58 per share for the quarter.

The Information Technology Index gathered 1.80 percent, with BlackBerry Limited (BB.TO) surging 6.61 percent on reports that Samsung Electronics is still interested in acquiring the smartphone maker.

Sierra Wireless (SW.TO) gained 1.37 percent and Constellation Software (CSU.TO) added 1.05 percent.

The Healthcare Index advanced 1.22 percent, as Valeant Pharmaceuticals International, Inc. (VRX.TO) added 1.96 percent and Catamaran Corp. (CCT.TO) gained 2.77 percent.

The Capped Telecommunication Index gathered 2.13 percent, as Manitoba Telecom Services Inc. (MBT.TO) gained 1.08 percent, Rogers Communications Inc. (RCI.B.TO) was up 1.81 percent, and TELUS Corp. (T.TO) adding 3.63 percent.

On the economic front, a report from the Labor Department on Thursday showed a modest drop in first-time claims for U.S. unemployment benefits in the week ended January 17, with claims coming in above economists' estimates. Initial jobless claims dropped to 307,000, a decline of 10,000 from the previous week's revised level of 317,000. Economists had expected jobless claims to slide to 300,000 from the 316,000 originally reported for the previous week.

From Europe, the U.K. budget deficit increased in December from last year, the Office for National Statistics said Thursday. Public sector net borrowing excluding public sector banks totaled GBP 13.1 billion, an increase of GBP 2.9 billion or 27.8 percent from last year. The deficit was forecast to fall to GBP 9.7 billion.

The eurozone government debt to gross domestic product ratio declined in the third quarter, Eurostat reported Thursday. At the end of the third quarter of 2014, government debt to GDP came in at 92.1 percent versus 92.7 percent in the second quarter. In the same period of last year, the ratio was at 91.1 percent.

The Bank of Japan in an assessment indicated the Japanese economy to be recovering at a moderate pace, but inflation is likely to slow, the Monthly Report on Recent Economic and Financial Developments revealed Thursday. Japan's economy has continued to recover moderately as a trend as the effects of the decline in demand following the sales tax hike have been waning on the whole, the central bank said.