By Alastair Sharp
TORONTO (Reuters) - Canada's main stock index reversed earlier losses on Friday after several stocks jumped on takeover moves, helping the TSX shrug off uncertainty over U.S. central bank monetary policy that hurt U.S. indices.
Shares in Valeant Pharmaceutical International Inc (Toronto:VRX.TO - News) jumped more than 13 percent to C$86.91 after a source said the company is close to a $9 billion deal to acquire eye care company Bausch & Lomb.
"The key thing here is that investors are very confident in management's ability to integrate this company," said Elvis Picardo, a strategist at Global Securities in Vancouver.
The deals, and particularly the potential Valeant purchase, pushed the index into positive territory, annulling broad weakness caused by fears that the U.S. Federal Reserve will turn off the tap on its stimulus program.
The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) ended up 9.13 points, or 0.07 percent, at 12,667.22. It gained 0.4 percent for the four-day week.
Global's Picardo said solid earnings reports from other Canadian banks next week could add to the recent momentum.
Data showing positive economic sentiment in Germany and a rise in shares of gold producers helped curb negative sentiment.
Investors have been rattled by hints from U.S. Fed Chairman Ben Bernanke that the central bank might slow its massive growth-stimulating bond purchases.
"The monetary easing in the United States is not going to go on forever," said Fred Ketchen, director of equity trading at ScotiaMcLeod.
"One of these days they're going to pull back on that," said. "So far they haven't got to that point."
Energy shares fell 0.3 percent, tracking a weekly drop in the price of oil.
Shares of Niko Resources (Toronto:NKO.TO - News) rose 22.7 percent to C$7.35. The company, along with partners Reliance Industries Ltd (NSE:RELIANCE.NS - News) and BP (LSE:BP.L - News), announced a significant gas condensate discovery off India's east coast.
The materials sector, which includes mining stocks, fell 0.9 percent as gold producers slipped.
"While there may be some investors willing to step in to these depressed TSX sectors, the fact remains that we are very much a proxy for global growth," Global's Picardo said.
Financials, the index's most heavily weighted sector, were up slightly.
"That's continuing the parade we've seen of encouraging, modestly improving earnings from our financial institutions," Ketchen said. "To me, that's a good sign."
(Additional reporting by John Tilak, editing by Bernadette Baum and Andrew Hay)