Fed surprise propels TSX to two-year high

By John Tilak

TORONTO (Reuters) - Canada's main stock index climbed to its highest point in more than two years on Wednesday, led up by a jump in gold producers after the U.S. Federal Reserve said it would keep its monetary stimulus measures in place for now.

The Fed's surprise announcement unleashed a flood of buying in the Toronto market as investors took positions in heavy-volume trading. The market in general had expected the Fed to scale back its stimulus program.

High-yield sectors such as REITs, utilities and telecoms clocked solid gains as they tend to thrive in a low interest-rate environment. But insurers slipped.

Shares of gold miners surged 8.7 percent, posting their biggest jump in about four years. The price of gold soared 4.2 percent.

The Fed said it would continue buying bonds at an $85 billion monthly pace, citing strains in the economy from tight fiscal policy and higher mortgage rates.

"People are extremely surprised. All life-support systems remain for the time being," said Matt Skipp, president of SW8 Asset Management, a Toronto-based hedge fund.

"Obviously the markets are taking a big leg up as a result," he added. "But there might be moments of introspection when you realize they don't have enough confidence in the economy to begin to taper."

Skipp said he doubled his exposure to gold-mining stocks to 10 percent of his portfolio after the Fed statement.

The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) closed up 97.29 points, or 0.76 percent, at 12,931.40, after rising as high as 12,958.88, its highest level since August 2011.

About 382 million shares changed hands, compared with an average daily volume of about 291 million shares in August, according to market operator TMX Group.

"The Fed is still priming the pump, so it looks like everyone's jumping on the bus," said Elvis Picardo, strategist at Global Securities in Vancouver. "It does seem that the money that was on the sidelines is coming pouring in."

"Interest is starting to come again into the TSX," he added. "If the U.S. and global economies continue to do well, it's very hard to make a bearish case for the TSX, and the bulls would prevail in that case."

The benchmark Canadian index is up nearly 6 percent this quarter.

Five of the 10 main sectors on the TSX were higher on Wednesday.

The materials sector, which includes mining stocks, rose 5.1 percent, helped by the gains in gold producers.

Barrick Gold Corp (Toronto:ABX.TO - News) was up 9.5 percent at C$20.66, and Goldcorp Inc (Toronto:G.TO - News) added 7.8 percent to C$29.19. The two stocks playing the biggest role in leading the index higher.

Financials, the index's most heavily weighted sector, lost 0.3 percent, with most major banks and insurers slipping.

Toronto-Dominion Bank (Toronto:TD.TO - News) gave back 0.3 percent to C$91.15. Manulife Financial Corp (Toronto:MFC.TO - News) dropped 2.1 percent to C$17.58 and was one of the most influential decliners, while Sun Life Financial Inc (Toronto:SLF.TO - News) slipped 0.9 percent to C$33.29.

BlackBerry fell more than 2 percent to C$10.64 after launching a new flagship smartphone. Separately, the Wall Street Journal said BlackBerry plans to slash thousands of jobs by the end of the year, a report the company declined to comment on.

The REIT sector added 1.5 percent, utilities gained 0.9 percent, and telecoms advanced 0.7 percent.

China's top offshore oil explorer, CNOOC Ltd (HKSE:0883.HK - News), made its long-awaited debut on the Toronto Stock Exchange on Wednesday under the symbol "CNU" (:CNU.TO).

CNOOC last year promised to cross-list its shares in Canada, as part of undertakings made to the Canadian government to win approval of its $15.1 billion acquisition of Canadian oil and gas company Nexen Inc.

($1=$1.03 Canadian)

(Additional reporting by Alastair Sharp; Editing by Peter Galloway)