Money world

Solid advances in commodity stocks sent the Toronto stock market sharply higher late Tuesday morning, but the financial sector was weak after Bank of Montreal said troubles in the credit markets will reduce its first-quarter profit.

New York markets were higher but well off earlier highs as investors took in a disappointing outlook from Wal-Mart Stores.

Toronto's S&P/TSX composite index gained 153.72 points to 13,380.48 as the market continued to improve after hitting its most recent lows a month ago over worries about the depth of an American economic slowdown. The TSX Venture Exchange was up 31.27 points to 2,616.26.

"I can't quite figure out what's going on today – it's obviously Asian demand is still there and you have the commodities moving but other than that, I don't get it," said Chyanne Fyckes, chief investment manager at Stone Asset Management.

Bank of Montreal (TSX: BMO) disclosed it will take about $490 million in first-quarter charges – or $325 million after tax – over trading activities and valuation adjustments in the BMO Capital Markets group.

BMO also unveiled a proposal to support Links Finance Corp. and Parkland Finance Corp., two structured investment vehicles. BMO will backstop senior note obligations "to facilitate the continued orderly management of the SIVs, while balancing the interests of our shareholders, clients and debt holders."

Its shares fell 85 cents to $52.98 as investors wonder about more writedowns from the bank – and other financial institutions in Canada and abroad.

"Part of the problem is that they're just writing this off, writing that off," added Fyckes.

"I think if they had any idea about how bad it was, they would just go ahead and write it off and be done with it. But they're not doing that this time because they don't know what's going on and that's what I find very disconcerting."

British bank Barclays Group PLC revealed credit-related losses totaling $3.13 billion, up from a smaller write-down in November, while Credit Suisse, Switzerland's second-largest bank, said it has suspended "a handful" of traders in connection with the overvaluation of asset-backed securities by $2.85 billion.

The misvaluation will reduce earnings by US$1 billion in the first quarter but Credit Suisse expects to remain profitable for the quarter even with the writedown.

The Canadian dollar gave back 0.39 of a cent to 98.85 cents US after Statistics Canada reported Canada's annual inflation rate slid to 2.2 per cent in January, from 2.4 per cent in December, as consumers benefit from the strong dollar and a single percentage-point drop in the GST.

But indications of a slowing Canadian economy showed up in the most recent data for wholesale sales.

Statistics Canada announced that those sales fell 2.9 per cent in December to $42.7 billion, ending a string of three straight monthly increases. Economists had been looking for a 0.2 per cent rise.

The drop largely reflected an 8.1 per cent decline in the automotive sector.

Analysts believe weak reports such as wholesale sales data and a weak reading in manufacturing shipments last week – along with Tuesday's tame inflation report – point to more interest rate cuts by the Bank of Canada.

"We expect that the overnight rate will be cut 50 basis points at the March 4 policy meeting with an additional 50 basis points in rate cuts to come at subsequent meetings to bring the rate to three per cent by mid-year," said RBC senior economist Dawn Desjardins.

In New York, the Dow Jones industrials was ahead 56.33 points to 12,404.54 after surging as much as 157 points.

Wal-Mart's fourth-quarter profit rose to $4.09 billion, or $1.02 a share, in line with expectations low fees payday loan. Its 2008 earnings outlook missed analyst expectations but its shares drifted 21 cents higher to US$49.65.

The Nasdaq composite index gained 5.78 points to 2,327.58 while the S&P 500 moved ahead 4.92 points to 1,354.91.

The TSX financial sector came down from a one per cent advance to a slight rise of 0.2 per cent at late morning as investors took in negative news from overseas banks.

The Toronto energy sector moved up two per cent as oil prices ran ahead. The March crude oil contract on the New York Mercantile Exchange moved up $2.83 to US$98.33 a barrel.

An explosion at a 70,000-barrel-a-day refinery in Texas may have boosted prices, but analysts believe the primary worry is that the Organization of Petroleum Exporting Countries may reduce output next month to support prices in a range of $85 to $100 a barrel.

EnCana Corp. (TSX: ECA) gained 78 cents to C$71.10 and Canadian Natural Resources (TSX: CNQ) improved $2.74 to $67.84.

The gold sector was 4.5 per cent higher as the April bullion contract on the Nymex climbed $25.90 to US$932 an ounce. Barrick Gold Corp. (TSX: ABX) gained $1.94 to $49.95.

The base-metals sector ran ahead almost three per cent.

Teck Cominco Ltd. (TSX: TCK.B) improved $1.17 to $34.45 and Equinox Minerals (TSX: EQN) rose 29 cents to $5.28.

Shares in Thomson Corp. (TSX: TOC) were down 60 cents to $34.20 after the Canadian company won European and Canadian regulatory approval Tuesday to buy news and information provider Reuters Group PLC, but it must sell off financial research units to eliminate antitrust concerns.

A subsidiary of Manulife Financial Corp. (TSX: MFC), Canada's largest insurance company, is adding to the portfolio of U.S. forest land that it manages in a deal valued at US$1.71 billion, including the assumption of debt. Manulife shares traded at at$37.51, up 21 cents.

Overseas, Tokyo's Nikkei 225 index rose 122.51 points, or 0.90 per cent, to 13,757.91.

Hong Kong's Hang Seng Index gained 363.92 points, or 1.53 percent, to 24,123.17. The index lost 1.6 percent on Monday after adding nearly 7 percent over the previous four sessions.

Britain's FTSE 100 gained 13.8 points to 5,960.4, Germany's DAX index was up 51.8 points to 7,019.35 and the Paris CAC-40 was up 25.35 points to 4,887.15.

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