Traders relieved by German court ruling

Malcolm Morrison, Canadian Press | Sep 12, 2012 9:49 AM ET |

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The Toronto stock market was higher Wednesday after a big chunk of uncertainty was removed from Europe’s efforts to solve a debt crisis that has been dragging on for almost three years.
The S&P/TSX composite index ran ahead 52.12 points to 12,272.57 after Germany’s high court on Wednesday rejected calls to block the European Union’s permanent rescue fund.
Opponents had challenged Germany’s ratification of the European Stability Mechanism, which is a new, permanent C500 billion bailout fund for the 17 countries that use the euro. They had argued that it violated the country’s constitution and sought an injunction preventing the country’s president from signing the legislation into law. Germany’s ratification of the ESM is key, because the fund cannot work without the country’s participation.
The TSX Venture Exchange rose 6.46 points to 1,281.05.
The Canadian dollar was off 0.11 a cent to 102.64 cents US after running up about 1.8 cents since last Wednesday. The loonie hit a 13-month high this week as traders anticipate that last week’s disappointing U.S. jobs data for August convinced the Federal Reserve that the economy needs another round of economic stimulus.
Such measures could include a third round of quantitative easing, which would see the Fed print more money to buy up bonds in order to keep interest rates low and encourage borrowing.
U.S. markets were sharply higher as traders greeted the German court decision relief and looked to an announcement by the Fed Thursday at the conclusion of their two-day meeting on interest rates.
However, markets could be in for a severe disappointment. Some analysts believe that the Fed will do nothing more than reassert that it’s willing to do more, especially as a number of its policymakers may be reluctant to do something dramatic in the middle of the U.S. presidential campaign.
The Dow Jones industrials climbed 37.87 points to 13,361.23, the Nasdaq was up 11.68 points to 3,116.21 while the S&P 500 index gained 5.03 points to 1,438.59.
The European rescue fund is important because it can loan money to cash-strapped governments. It’s also due to play a key role in the recent bond-buying plan unveiled by European Central Bank president Mario Draghi, which has helped turn around market sentiment over the last several weeks.
Commodity prices were mixed as traders hoped that the court decision and the ECB’s bond-buying plan — which is intended to ease borrowing rates for the hardest-hit members of the eurozone — will help Europe get out of a severe economic slump and raise demand.
The base metals sector gained one per cent while copper prices backed off slightly after rallying for the past three sessions with the December contract down one cent to US$3.68 a pound. The metal, viewed as an economic barometer as it is used in so many applications, has run up 18 cents over the last three sessions.
First Quantum Minerals (TSX:FM) climbed 50 cents to $22.10 while Thompson Creek Metals (TSX:TCM) gained 14 cents to $3.36.
The October crude contract on the New York Mercantile Exchange lost early gains to dip four cents to US$97.13 a barrel. Traders hope to get a better idea of demand after the U.S. Energy Department is expected to report later in the morning that the country’s crude stockpiles fell by 3.3 million barrels last week.
The energy component improved by 0.35 per cent with Canadian Natural Resources (TSX:CNQ) ahead 21 cents to $32.39 and Suncor Energy (TSX:SU) up 14 cents to $32.74.
The December bullion contract gained $8.70 to US$1,743.60 an ounce and the gold sector advanced 0.65 per cent. Goldcorp Inc. (TSX:G) was 59 cents higher to $41.71.
The tech sector also provided lift with Celestica (TSX:CLS) ahead 11 cents to $7.82 and Research In Motion Ltd. (TSX:RIM) up eight cents to $7.35.
The telecom space led decliners as BCE Inc. (TSX:BCE) shed 42 cents to $43.87.
The power struggle between the board of Telus Corp. (TSX:T) and New York hedge fund Mason Capital Management LLC appears headed for an appeal court. Mason says it will appeal a B.C. court decision that blocks it from holding a shareholders meeting for investors with Telus voting stock, a move that rivals the company’s own plans for a meeting of all voting and non-voting shareholders.
Telus and Mason are in a bitter public battle over a plan to eliminate the Canadian telecom company’s dual-class share structure. Mason opposes a Telus plan that would swap non-voting stock for common stock on a one-to-one basis, arguing that doesn’t recognize the greater market value of the voting shares.
Telus common shares (TSX:T) advanced 21 cents to $61.82 while its non-voting A shares gained nine cents to $61.14.
European bourses were mixed in the wake of the German court decision with London’s FTSE 100 index off 0.03 per cent, Frankfurt’s DAX gained 0.49 per cent and the Paris CAC 40 climbed 0.4 per cent.
In other corporate news, Dollarama Inc. (TSX:DOL) had a net profit of $49.8 million in its second quarter, up 32 per cent from the comparable period last year. Dollarama’s revenue was up 13.8 per cent, rising to $441 million from $387.5 million for the corresponding period last year. The profit amounted to 66 cents per diluted share, two cents higher than analyst forecasts but its shares fell 88 cents to $58.42.
Facebook shares were up $1.04 or 5.35 per cent to US$20.47 after CEO Mark Zuckerberg told a conference Tuesday that the social network site cares about making money as well as pursuing his mission to make the world a “more open and connected place.”
Facebook stock has lost nearly half its value since its IPO in May. More than $50 billion has been lopped off Facebook’s market value as the company’s shares have fallen from its IPO price of $38.
Shares in Apple Inc. were $2.10 higher to US$662.69. The tech icon is expected to unveil a new iPhone later in the day. It may also unveil a mini iPad.

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