TORONTO - Expectations that the U.S. Federal Reserve will cut interest rates soon sent stock markets sharply higher Tuesday while bullish economic data sent the Canadian dollar up almost one full US cent.
Toronto's S&P/TSX composite index moved up 78.79 points to 13,704.28. The TSX Venture Exchange added 47.26 points to 2,715.63.
The currency jumped 0.98 cent to 95.99 cents US, as Statistics Canada reported that imports jumped 3.5 per cent to $35.7 billion in July, from a revised $34.5 billion in June. The country's trade surplus with the world narrowed to $3.7 billion, as imports increased at more than twice the pace of exports.
Economists had expected it to come in at $5 billion.
"The headline number might have been relatively dismal, but the breakdown showed a pretty robust domestic spending with the imports up sharply,'' said David Watt, senior currency specialist with RBC Capital Markets.
Canada Mortgage and Housing Corp. said the annual rate of housing starts was 226,500 units in August, up from 215,600 in July.
In New York, the Dow Jones industrials surged 180.54 points to 13,308.39 with support also coming from some solid corporate news.
The Nasdaq composite index advanced 38.36 points to 2,597.47, while the S&P 500 index climbed 19.79 points to 1,471.49.
Investors are counting on the Fed to cut interest rates by at least a quarter-point to boost confidence in credit markets and curb damage in the housing sector from spilling into the overall economy.
"My sense is people are sort of settling on 25 basis points and that 50 would be a bit of a surprise,'' said John O'Connell, portfolio manager at RBC Dominion Securities.
"Certainly a quarter (point cut) is in the market. And so the issue really will be how much of that is being discounted now -- and if you do only get a quarter-point cut, will people sort of go, `Oh, that's a disappointment'.''
Investors also took in a speech by Fed chairman Ben Bernanke to the German central bank.
But he didn't talk monetary policy -- instead addressing global imbalances.
Bernanke told his audience that the United States and other countries must work together to right a skewed pattern of trade and investment around the globe, a move that would help worldwide economic stability.
Corporate news also boosted market sentiment.
McDonald's Corp. shares gained 3.21 per cent to US$51.76 as it said global sales at restaurants open at least a year rose 8.1 per cent in August.
General Motors Corp. said it was spending less on incentives for newly released crossover vehicles and its shares ran up 4.55 per cents to US$30.54..
On the TSX, the energy sector was up 0.71 per cent as oil prices headed higher in the wake of a surprise announcement from OPEC that the cartel will boost its crude output by 500,000 barrels a day in an effort to calm markets roiled by high oil prices and worried that supplies could grow tight by the end of the year.
The October crude contract on the New York Mercantile Exchange gained 74 cents to a fresh record closing price of US$78.23 a barrel and Petro-Canada gained 68 cents to $55.28 and EnCana Corp. advanced 61 cents to $63.
The metals and mining sector climbed 1.9 per cent with Ivanhoe Mines up 50 cents to $11.01 and Equinox Minerals gained 23 cents to $3.90.
Adanac Molybdenum Corp. shares ran ahead seven cents to $1.45 after the Vancouver company received its environmental assessment certificate for construction of a molybdenum mine and processing plant.
Lift also came from the industrials sector where Bombardier Inc. rose 14 cents to $6.40 and ATS Automation Systems climbed 30 cents to $7.55, with the company urging stockholders to reject a proposal from a shareholder rights group to elect a new slate of directors.
The gold sector was ahead 1.35 per cent with the December bullion contract in New York rising $8.90 to US$721.10 an ounce and Kinross Gold was ahead 42 cents to $14.44.
Clarification of the status of its operations in Mongolia lifted shares in junior miner Khan Resources Inc. 61 cents or 35.65 per cent to $2.32 in heavy trading Tuesday.
Toronto-based Khan said it is moving to convert a special exploration licence into a mining licence after a statement from Mongolian authorities urged miners to move projects into production.
On the TSX, advances beat declines 910 to 676 with 226 unchanged as 335 million shares traded worth $6.5 billion.
Yoga clothing retailer Lululemon Athletica Inc. says its profit nearly tripled in the second quarter to US$5.1 million. But it also said the third quarter won't be as great as the second and its shares fell $1.52 to $37.25.
Le Chateau Inc. shares declined 65 cents to $14.35 after it reported Monday its second-quarter profit increased 28 per cent after double-digit sales.
Major Drilling Group International Inc. reported revenue shot up 52 per cent to a record $143.4 million in the latest quarter. But its first-quarter profit fell to $18.9 million, from $22.9 million a year ago, when there was a large gain from the sale of the firm's manufacturing division. Its shares rose $1.31 to $51.63.
Brick Brewing Co. Ltd. is blaming the dominant beer retailer in Ontario for what Brick's chairman characterizes as an "unsatisfactory'' second-quarter profit of $283,000. Brick's gross revenue was $22 million, down 6.8 per cent from a year ago. Its shares were down 18 cents or 9.33 per cent to $1.75.
