TSX Rallies To End Higher After China Rate Cut -- Canadian Commentary

(RTTNews) - Canadian stocks snapped a six-day loss to end higher on Tuesday, after China slashed its benchmark interest rates to boost a faltering economy, easing anxiety of a possible stock market meltdown. Consequently, investors turned to equities, further encouraged by prospects of some bargain hunting.

The uptick was led by the financial and energy sectors with gold stocks dropping, as fears of a global stock market meltdown eased.

Global markets recovered, after the People's Bank of China lowered interest rates for the fifth time in nine months. The central bank cut its key interest rates and reserve ratio in a surprise move on Tuesday, boosting efforts to support the slowing economy. Nevertheless, China's benchmark Shanghai Composite Index plunged 7.63 percent overnight, following its 8.49 percent plunge yesterday.

China reduced interest rates by 0.25 percentage points each, the People's Bank of China said in a statement on its website.

The benchmark one-year lending rate was cut to 4.6 percent and the deposit rate was slashed to 1.75 percent. The new rates are effective from August 26. The ceiling on fixed deposits with tenure more than a year was also scrapped in sync with the deposit rate liberalization plan.

Markets in Europe ended firmly in positive territory Tuesday, with the gains partly due to bargain-hunting following the steep losses in recent days. German business confidence also improved unexpectedly in August.

There was some upbeat economic data out of the U.S., with consumer confidence showing substantial improvement in August. Rebounding from a decline last month, the index moved to a seven-month high.

Markets in the United States pared much of the gains to end mostly in the red, after bargain hunting contributed to the early strength on Wall Street on the heels of some steep losses seen in recent days.

The benchmark S&P/TSX Composite Index closed Tuesday at 13,150.93, up 98.19 points or 0.75 percent. The index scaled an intraday high of 13,445.63 and a low of 13,134.33.

On Monday, the index closed down 420.93 points or 3.12 percent, at 13,052.74. The index scaled an intraday high of 13,396.76 and a low of 12,705.17.

The heavyweight Financial Index gained 1.97 percent, as National Bank of Canada (NA.TO) climbed 1.61 percent, and Royal Bank of Canada (RY.TO) shed 2.87 percent.

Toronto-Dominion Bank (TD.TO) jumped 2.71 percent, Bank of Nova Scotia (BNS.TO) gathered 1.86 percent, and Canadian Imperial Bank of Commerce (CM.TO) added 2.30 percent.

Crude oil futures rebounded to end higher, as China lowered its benchmark interest rates to boost its economy with most global equity markets recovering from the brutal losses in the previous session following the massive sell-off on China worries.

The Energy Index dropped 1.51 percent, with U.S. crude oil futures for October delivery, the most actively traded contract, gained $1.07 or 2.8 percent, to settle at $39.31 a barrel on the New York Mercantile Exchange Tuesday.

Crescent Point Energy Corp. (CPG.TO) added 1.11 percent, Canadian Natural Resources Limited (CNQ.TO) fell 0.65 percent, and Encana Corp. (ECA.TO) gathered 3.49 percent. Suncor Energy Inc. (SU.TO) moved up 2.10 percent.

The Diversified Metals & Mining Index added 0.88 percent, as First Quantum Minerals (FM.TO) gained 1.54 percent, Teck Resources Limited (TCK-B.TO) shed 0.52 percent, Lundin Mining Corp. (LUN.TO) advanced 0.52, and HudBay Minerals Inc. (HBM.TO) gained 2.51 percent.

Gold futures ended lower, amid easing anxiety of a possible stock market meltdown after China cut its benchmark interest rates to boost its faltering economy.

The Gold Index dropped 2.58 percent, with gold for December delivery shedding $15.30 or 1.3 percent, to settle at $1,138.30 an ounce on the New York Mercantile Exchange Tuesday.

Yamana Gold Inc. (YRI.TO) plunged 7.04 percent, having dropped 10.30 percent yesterday.

Among other gold stocks, Barrick Gold Corp. (ABX.TO) shed 1.88 percent, and Kinross Gold Corp. (K.TO) dived 4.56 percent. Goldcorp Inc. (G.TO) fell 1.65 percent. Eldorado Gold Corp. (ELD.TO) plummeted 4.13 percent.

The Capped Materials Index fell 0.99 percent, as Agrium Inc. (AGU.TO) dropped 3.18 percent, Agnico Eagle Mines Limited (AEM.TO) shed 3.18 percent, and Potash Corp. of Saskatchewan Inc. (POT.TO) surrendered 0.80 percent.

The Capped Health Care Index added 0.97 percent as Concordia Healthcare Corp. (CXR.TO) gained 0.94 percent, Extendicare Inc. (EXE.TO) moved up 1.44 percent, and Valeant Pharmaceutical International (VRX.TO) gathered 0.61 percent.

The Capped Information Technology Index gathered 1.14 percent, as BlackBerry Limited (BB.TO) fell 2.49 percent.

Among other tech stocks, Sierra Wireless (SW.TO) gained 2.88 percent, Descartes Systems Group (DSG.TO) gathered 1.25 percent, and Avigilon Corp. (AVO.TO) fell 2.11 percent.

The Capped Telecommunication Index shed 0.88 percent, as Rogers Communication (RCI-B.TO) dropped 1.03 percent, BCE Inc. (BCE.TO) inched up 0.04 percent, TELUS Corp. (T.TO) shed 1.60 percent, and Manitoba Telecom Services Inc. (MBT.TO) surrendered 0.87 per share.

The Capped Industrials Index fell 1.71 percent, even as Bombardier (BBD.B.TO) climbed 2.48 percent and Finning International Inc. (FTT.TO) gained 1.10 percent.

Bank of Montreal (BMO.TO) jumped 2.48 percent after reporting third quarter adjusted earnings of C$1.86 per share, topping the consensus estimate of C$1.73 a share. The company's board of directors also declared a 5 percent higher quarterly dividend of C$0.82 per share.

Sun Life Financial (SLF.TO) added 2.19 percent, on news of its reportedly being in talks to buy Assurant Inc.'s employee-benefits unit.

On the economic front, China's central bank cut its key interest rates and reserve ratio in a surprise move on Tuesday, boosting efforts to support the slowing economy as the Chinese stock market fell steeply for a second straight day. The interest rates were reduced by 0.25 percentage points each, the People's Bank of China said in a statement on its website.

China's benchmark one-year lending rate was cut to 4.6 percent and the deposit rate was slashed to 1.75 percent. The new rates are effective from August 26. The ceiling on fixed deposits with tenure more than a year was also scrapped in sync with the deposit rate liberalization plan.

New home sales in in the U.S. showed a notable rebound in sales in July, with sales jumping to an annual rate of 507,000 in July, 5.4 percent above the revised June rate of 481,000. Economists expected new home sales to climb to a rate of 516,000 from the 482,000 originally reported for the previous month.

Consumer confidence in the U.S. has seen a substantial improvement in August, with the Board's consumer confidence index surging to 101.5 in August from 91.0 in July. The index had been expected to show a more modest increase to a reading of 94.0.

A leading economic index for China remained positive in July, the latest survey from the Conference Board showed on Tuesday, advancing 0.9 percent. That follows the downwardly revised 0.6 percent increase in June (originally up 1.0 percent) and the 1.1 percent jump in May.

German business confidence improved unexpectedly in August, reports said citing data from the Munich-based Ifo Institute on Tuesday. The Ifo Business Climate Index rose to 108.3 in August from 108 a month ago. It was forecast to fall to 107.6.

Germany's economic growth improved as initially estimated in the second quarter, driven by strong exports. Gross domestic product rose 0.4 percent quarter-on-quarter, faster than the 0.3 percent expansion seen in the first three months of the year, final data from Destatis showed Tuesday. The growth rate matched the preliminary estimate released on August 14.