Investor Alert

Canadian Markets

Sept. 13, 2012, 6:43 p.m. EDT

Canadian stocks climb as Fed launches stimulus

By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — Canadian stocks climbed to a five-month high Thursday, with advances in gold and energy stocks after the U.S. Federal Reserve said it would launch a new round of stimulus to aid the world’s largest economy.

The S&P/TSX Composite Index (TORONTO:CA:GSPTSE)  rose 127.54 points, or 1%, to 12,360.16, its best closing level since early April. The index had been down about 4 points just before the Fed launched a third round of quantitative easing through large purchases of bonds. The Fed said it would buy mortgage-backed securities at a pace of $40 billion a month in an effort to bring down long-term interest rates and bolster growth.

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Gold stocks struggled with minor losses as investors moved cautiously before the Fed’s announcement. But as the group strengthened, the S&P/TSX Capped Materials Index (TORONTO:XX:TORGC195)  surged 3.1%. Barrick Gold Corp. (TSE:CA:ABX)  leapt 4.1% to C$40.32 and nearly topped the Composite Index’s list of most actively traded stocks. Goldcorp Inc. (TSE:CA:G)  shares rose 4.7% and Kinross Gold (TSE:CA:K)  picked up 2.7%.

Gold futures, which had slipped before the Fed’s decision was released, ended by notching their highest settlement in nearly seven months. Gold for December delivery (NYM:GCZ22)  rose $38.40, or 2.2%, to $1,772.10 an ounce. See more about gold futures in Metals Stocks.

Energy stocks had begun to lose steam before the Fed also announced plans to keep the benchmark short-term interest rate at nearly zero until mid-2015. It previously expected the first rate hike to take place in late-2014. Read about the Fed's stimulus measures.

But the S&P/TSX Capped Energy Index (TORONTO:XX:TORGC187) staged a comeback, finishing up 1.5% with EnCana shares turning higher by 1.6%. Talisman Energy  shares also reversed course to end up 1.2%, and Husky Energy  advanced 1.1%.

Oil futures ended at their highest level since early May, leaving crude for October delivery up by $1.30, or 1.3%, at $98.31 a barrel on the New York Mercantile Exchange. Futures gained on the Fed’s stimulus plan, as well as on concerns about developments in the Middle East after the U.S. ambassador to Libya was killed in Benghazi on Tuesday. Read about oil futures.

Canada’s currency rises against the U.S. dollar.

The Fed’s monetary policy committee ended its two-day meeting saying it was concerned that, without the action, “economic growth might not be strong enough to generate sustained improvement in labor market conditions.”

Canada’s currency (XTUP:USDCAD)  leapt to its best level in 13 months against the U.S. dollar, touching $1.032 after the Fed unveiled its bond-buying strategy. Canada’s loonie late Wednesday bought 97.66 U.S. cents .

On Wall Street, U.S. stocks rallied, with the Dow Jones Industrial Average (DOW:DJIA)  closing higher by 207 points at 13,539.86 and the S&P 500 Index (S&P:SPX)  finishing up 1.6% at 1,459.99. More about Thursday's rally in U.S. stocks.

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