TORONTO - A healthy runup in energy and metals stocks pushed the Toronto stock market slightly higher late Monday morning, but gains were curbed by falling bank and insurance stocks.
Financial stocks were under pressure as more and more individuals and companies have been revealing exposure to a fund run by investment manager Bernard Madoff, which prosecutors say was a US$50-billion Ponzi scheme to defraud investors. Banking institutions involved include Banco Santander, BNP Paribas, Royal Bank of Scotland Group PLC and hedge fund Man Group PLC.
The Wall Street Journal says other alleged victims investment pool include real estate magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie Wiesel and a charity of movie director Steven Spielberg.
"The investor psyche is already quite fragile. Scandals like this just add fuel to the fire," said Alan Gayle, senior investment strategist for RidgeWorth Capital Management.
Toronto's S&P/TSX composite index was down from an early spike of about 100 points but was still ahead 32.97 points to 8,548.42.
Gains in commodity stocks followed an offer from Ottawa over the weekend to assist the struggling mining and forestry sectors in next month's federal budget.
The commitment over the weekend from industry minister Tony Clement followed his announcement Friday that the government will also put up $3.4 billion in aid to the auto industry, contingent on the U.S. government putting together a US$14-billion package.
"Do I think it's really moving the market to a great degree?" said Gareth Watson, associate director and Canadian equity adviser Scotia McLeod.
"No, I think it's more the underlying commodity prices which are going to continue to be the main driver of that sector."
Weakness in the American dollar helped boost the Canadian currency 1.76 cents to 81.66 cents US.
The TSX Venture Exchange rose 5.25 points to 723.79.
New York's Dow Jones industrials fell 100 points to 8,529.6.
The Nasdaq composite index was off 37.11 points to 1,503.61 while the S&P 500 index lost 13.9 points to 865.85.
Investors also seemed hesitant to make any major moves ahead of the Federal Reserve's Tuesday's decision on interest rates. A cut of at least half a point is widely expected.
Investors will be anxious to see the accompanying statement to get the Fed's latest take on the economy.
There were also data showing that industrial output fell slightly less than expected in November as manufacturers continued to suffer from weakness in autos and many other areas.
The Federal Reserve says industrial activity dropped by 0.6 per cent in November against expectations for a 0.8 per cent slide.
The Toronto energy sector led advances on the TSX, up 2.8 per cent as the crude contract on the New York Mercantile Exchange jumped $1.52 to US$47.80 a barrel.
Helping drive crude prices higher is the expectation that OPEC will announce a substantial production cut on Wednesday.
EnCana Corp. (TSX:ECA) rose $1.06 to $56 while Suncor Inc. (TSX:SU) improved $1.16 to $26.23.
The base metals sector advanced 4.5 per cent as Teck Cominco Ltd. (TSX:TCK.B) rose 66 cents to $6.11 after it announced that it will temporarily shut down the Pend Oreille zinc mine in Washington State next February due to low metals demand, laying off 165 employees.
Elsewhere in the sector, Sherritt International (TSX:S) was up 11 cents at $3.26.
The gold sector was also a bright spot, up almost five per cent as the February bullion contract on the Nymex climbed $16.50 to US$837. Goldcorp (TSX:G) rose $2.41 to $37.20.
The financials sector was the biggest drag on the TSX, down 2.35 per cent as National Bank (TSX:NA) lost $1.36 to $29.13 after Quebec and Alberta turned down suggestions to participate in talks aimed at restructuring the $32 billion Asset Backed Commercial Paper market. Financials in both provinces have heavy exposure to ABCP, particularly Quebec's huge pension fund, the Caisse de depot et placement du Quebec, which holds $12.6 billion.
But the potential fallout from the Madoff investigation also cast a pall over financials.
"There's a bit of an overhang out there with that news until you finally get some concrete finality to the ABCP situation," added Watson.
"We really haven't heard from any of the (U.S. Financials) as to whether or not they've been impacted by this. Madoff is probably going to overhang us here for the next couple of weeks."
TD Bank (TSX:TD) declined $1.30 to $40.23 and Manulife Financial (TSX:MFC) fell $1 to $20.25.
In other Canadian corporate news, Allen-Vanguard Corp. (TSX:VRS) which makes protective equipment for both the Canadian and U.S. military, has secured a $15.3 million contract to build blast protection seats for General Dynamic Land Systems-Canada. Its shares were up nine cents to 37.5 cents.
Garda World Security Corp. (TSX:GW) shares were ahead seven cents to $1.25 after the company reported a third-quarter loss of $2.2 million, reversing year-earlier profit of $4.1 million.
Asian markets overseas shot higher on the hope of an automaker lifeline.
Japan's Nikkei stock average rose 5.21 per cent, while Hong Kong's Hang Seng index rose 1.96 per cent.
Britain's FTSE 100 was down 0.6 per cent, Germany's DAX index was of 0.45 per cent, and France's CAC-40 lost 1.1 per cent.
