TSX closes higher as oil retreats from recent gains amid uncertainty over Iraq

Photo: The Canadian Press. All rights reserved.

A tote board TSX numbers in Toronto, on Dec.31, 2012. THE CANADIAN PRESS/Frank Gunn

TORONTO - The Toronto stock market closed higher Monday as violence in Iraq pushed up most commodities even though the price of oil retreated slightly from recent gains.

The S&P/TSX composite index added 38.82 points to 15,040.43 after having earlier reached a level about two points above its all-time closing high of 15,073. The record was set on June 18, 2008, just before the Great Recession sent stocks downward.

The Canadian dollar was up 0.13 of a cent to 92.24 cents US ahead of a two-day meeting of the U.S. Federal Reserve.

On Wednesday, the U.S. central bank will deliver its economic outlook and decide whether it will continue to dial back massive bond purchases. The stimulus program, which involves the central bank buying Treasury and mortgage bonds to try to keep long-term loan rates low, has long propped up equity markets.

However, the Fed is still expected to announce a further $10-billion reduction is its buyback program to $35 billion a month on signs of an improving economy.

Chris King of Morgan Meighen and Associates said Fed chair Janet Yellen is unlikely to make any surprise announcements following the meeting.

"(The Fed) doesn't want to disrupt the steady progress that is being made," said King, a vice-president and portfolio manager.

"The concern is that investors and the Main Street psyche is still quite weak and the economy runs on confidence. The biggest risk would be the economy, so they have got to keep confidence in the markets sustainable."

Meanwhile, Wall Street was flat in advance of the Fed gathering despite a new forecast from the International Monetary Fund predicting the U.S. economy will grow at a modest two per cent this year, down from its earlier prediction of 2.7 per cent.

The adjusted forecast comes amid similar data by the World Bank, which cut its 2014 global growth forecast to 2.8 per cent from 3.2 per cent, citing the long winter and the political crisis in Ukraine.

The Dow Jones industrials gained 5.27 points to 16,781.01, the Nasdaq added 10.46 points to 4,321.11 and the S&P 500 climbed 1.62 points to 1,937.78.

Meanwhile, in Canada, data showed the real estate market is still going strong. The Canadian Real Estate Association said home sales in May were up 5.9 per cent compared with April and were 4.8 per cent higher than a year ago.

In commodities, benchmark U.S. crude for July delivery dipped a penny to US$106.90 a barrel after having run up last week amid the instability in Iraq, where the situation deteriorated over the weekend as militants on Sunday posted graphic photos of truckloads of Iraqi soldiers that they apparently captured and killed.

So far oil exports from Iraq, the second-largest producer among the Organization of Oil Exporting Countries, have not been affected, but concern for global supplies has been growing.

The unfolding conflict has sent traders to other commodities such as gold, due to the future potential volatility of stocks. August bullion was up $1.20 to US$1,275.30 an ounce and July copper advanced two cents to US$3.05 a pound.

Also adding to the uncertainty was Russia's decision to halt supplies of natural gas to Ukraine after the two sides were unable to agree on prices.

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