TSX higher as commodities rise, GE beats expectations

The Toronto stock market was slightly higher Friday as energy stocks advanced while oil prices hit a 15-month high and traders took in a mixed batch of U.S. earnings.

The S&P/TSX composite index gained 29.83 points to 12,658.68 after closing higher for three of the past four sessions.

The Canadian dollar was off 0.04 of a cent to 96.34 cents US as new data showed that inflation was well under control in June. Statistics Canada said that inflation came in at an annualized rate of 1.2 per cent, in line with economist expectations and up from a low rate of 0.7 per cent the previous month. On a month over month basis, prices rose at a seasonally adjusted 0.3 per cent.

U.S. indexes were lower after Google Inc. and Microsoft both missed forecasts for earnings and revenue while General Electric beat expectations.

The Dow Jones industrials lost 29.71 points to 15,518.83, the Nasdaq was down 27.85 points to 3,583.43 and the S&P 500 index declined 2.94 points to 1,686.43.

GE earned $3.13 billion or 30 cents a share in the latest quarter, up from $3.11 billion a year earlier. Earnings ex-items came in at 36 cents, a cent higher than estimates. Revenue fell four per cent, to $35.12 billion.

GE is viewed as an important bellwether because it sells a wide variety of industrial equipment and appliances around the world, including jet engines, medical diagnostic equipment, locomotives, washing machines, natural gas-fired turbines, and oil and gas drilling equipment. GE shares were up five per cent in New York.

Google earned $3.2 billion, or $9.54 per share, up 16 per cent from $2.8 billion a year ago. Earnings were $9.56 ex-items, lower than the $10.78 that analysts had forecast. Google handed in revenue of $14.11 billion versus expectations of $14.42 billion. Google’s average ad rate fell by six per cent from the same time last year during the quarter, marking the seventh consecutive quarter of falling ad prices and its shares fell 3.5 per cent .

Microsoft’s quarterly net income came to $4.97 billion, or 59 cents per share, reversing a loss of $492 million a year ago when it wrote down almost the entire value of its 2007 purchase of online ad service aQuantive. Earnings ex-items were 66 cents per share, short of the 75 cents per share expected by analysts. Revenue grew 10 per cent to $19.90 billion, also below the $20.72 million expected.

The world’s largest software company also booked a $900 million write-down to account for the deep price cut it applied to its Surface RT tablet this week, a move to spur sales amid sluggish demand. Microsoft shares fell 8.55 per cent.

The TSX is set to advance for a fourth week as investors have picked up resource stocks badly beaten down this year. But stocks around the world have had a generally solid week especially after U.S. Federal Reserve Chairman Ben Bernanke indicated that the scale and scope of the central bank’s monetary stimulus may remain in place for longer than many in the markets had been predicting.

During two days of congressional testimony this week, Bernanke reiterated that the Fed’s efforts to boost the U.S. economy remain tied to the job market’s health and inflation. He said he wants to see substantial progress in the job market before scaling back its $85 billion a month in purchases of bonds.

Commodity prices advanced with August bullion up $11.40 to US$1,295.60 an ounce on the New York Mercantile Exchange, pushing the gold sector up 2.3 per cent. Barrick Gold Corp. (TSX:ABX) climbed 37 cents to C$16.71.

August crude was up 43 cents to US$108.47 a barrel. Crude prices have advanced this week to the highest level since March, 2012, underpinned by another sizable decline in U.S. oil supplies. U.S. crude inventories fell by 6.9 million barrels last week, bringing the three-week decline to 27.1 million barrels.

The energy sector was ahead 0.6 per cent and Canadian Natural Resources (TSX:CNQ) gained 37 cents to C$34.29.

Techs also provided lift as BlackBerry (TSX:BB) rose 16 cents to $9.58.

Utilities led decliners, down 0.6 per cent with Atlantic Power (TSX:ATP) down 20 cents to $4.41.

The base metals sector was down 0.36 per cent while September copper rose one cent to US$3.15 a pound. First Quantum Minerals (TSX:FM) dropped 41 cents to $16.11.

Earlier in Asia, markets closed mostly lower amid worries over the Chinese and Japanese economies, the world’s second and third-largest.

China this week reported its second straight quarter of slower growth and authorities appear determined to stick to a path of shifting the economy away from reliance on investment and exports, which could dent economic activity in the near term.

In Japan, the initial euphoria over the “Abenomics” stimulus policies of Prime Minister Shinzo Abe has faded and doubts have emerged about whether deeper reforms will be carried out. Japan holds upper house elections this weekend.

Japan’s Nikkei 225 shed 1.5 per cent, Hong Kong’s Hang Seng added just 0.1 per cent, Seoul’s Kospi finished 0.2 per cent. China’s Shanghai Composite index fell 1.5 per cent.

After the Asian markets closed, the Chinese government announced it is taking further steps to expand its economy by ending controls on bank lending rates in a move toward creating a market-oriented financial system. Reform advocates see an overhaul of China’s interest rate policy as one of the most important changes required to keep its growth strong.

European bourses were in the red with London’s FTSE 100 index down 0.4 per cent, Frankfurt’s DAX was off 0.3 per cent and the Paris CAC 40 lost 0.22 per cent.

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