Shares on Toronto Stock Exchange rebound after US GDP revision, strong bank earnings

By Promit Mukherjee and Nikhil Sharma

(Reuters) -Shares on the main stock index in Toronto rebounded on Thursday, recouping half of the losses of the past two days, as stocks across a raft of sectors jumped after an upward revision in U.S. economic growth allayed fears of a recession.

The Toronto Stock Exchange's S&P/TSX composite index closed up 100.32 points, or 0.43%, to 23,227.30, inching back to an all-time high seen earlier in the week.

U.S. gross domestic product for the second quarter grew at a 3% annualized rate on higher consumer spending, quelling fears of an economic slowdown in the United States.

"This positive news has really solidified investors' expectations for that optimistic soft landing," said Candice Bangsund, vice president and portfolio manager, global asset allocation at Fiera Capital Corporation.

A soft landing is essentially a scenario where interest rates are high enough to bring inflation down to a central bank's target without causing a recession.

The benchmark index was also boosted by earnings in the local financial sector, which concluded with an earnings beat by Canada's fifth-largest bank CIBC. Its shares were up more than 5% on the day.

Investments in the financial sector, which has a weight of more than a quarter in the composite index, have grown by over 8% in the last three weeks, backed by strong earnings by a majority of lenders.

"They are a huge barometer of the Canadian economy," said Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth.

Some of the money the lenders had set aside to meet obligations of missed or default loan payments were lower than expected, reflecting a local economy in better shape than had been expected, Picardo said.

Statistics Canada will be releasing second quarter GDP numbers on Friday, with most analysts expecting a 1.6% quarter-on-quarter annualized growth. The numbers are most likely to firm up expectations of another 25 basis point rate cut next week, bringing Bank of Canada's key policy rate to 4.25%.

A rate cut would stimulate the economy further and be good for the market, Picardo said.

The materials sector, which comprises mainly gold and other mining companies; energy and technology stocks were other major gainers of the day. Real estate and consumer cyclicals, such as clothing and accessories firms, were the main losers.

(Reporting by Nikhil Sharma in Bengaluru and Promit Mukherjee in Ottawa; Editing by Shreya Biswas, Vijay Kishore and Jonathan Oatis)