Tuesday Market Report

Canadian stocks rose to the highest since May, led by energy producers, as oil prices held above $76 a barrel. The S&P/TSX added 61.50 points, or 0.5 percent, to 11,998.18, a level not seen since May 12. The Toronto Stock Exchange was closed yesterday for the Civic Holiday.

The S&P/TSX capped gold index added 0.85 of a point, or 0.27%, to 313.66. The S&P/TSX capped energy index cranked up by 6.05 points, or 1.70%, to 360.87.

U.S. stocks dropped for a third day on the prospect that the Federal Reserve may resume raising interest rates later this year, undermining earnings and economic growth. The Fed left the target rate for overnight bank loans at 5.25 percent today after 17 straight increases since June 2004. Stocks initially rose to the day's highs after the announcement and then retreated as policy makers, in a statement, said some inflation risks remain'' that may lead to higher rates. The Standard & Poor's 500 Index lost 4.29 points, or 0.3 percent, to 1,271.48. The Dow Jones Industrial Average declined 45.79 points, or 0.4 percent, to 11,173.59.
TOP STORY
The shutdown of a major Alaskan oil field sent oil prices sharply higher Monday and prompted investors to sell stocks on inflation fears. BP Plc said late Sunday it would shut down the Prudhoe Bay oilfield, which represents 8 percent of daily U.S. crude production, due to possible pipeline corrosion. As a result, crude oil futures surged $1.89 to $76.65 a barrel on the New York Mercantile Exchange.

The Energy Information Administration, the government's energy statistics arm, said in its short-term energy outlook earlier in the day (Tuesday) that, based on BP's statement Monday recovery would take several months, it expects Alaskan crude oil production to gradually return to full production before February. That would result in the loss of about 50 million barrels of oil over the next six months.

But later on Tuesday, Energy Secretary Samuel Bodman said there are adequate supplies to make up for the loss to West Coast refineries. Relatively high inventories of crude oil in the system and oil that can be diverted from other producers, including Saudi Arabia and Mexico, can help meet refinery needs, he said. Analysts are skeptical though and suggest oil may reach $80 US a barrel before too long.

IN THE NEWS

The gold sector moved 0.27 per cent higher as the October bullion contract in New York lost $2.20 to $650.90 US an ounce.

Crude oil fell on speculation that U.S. stockpiles are sufficient to make up for supply disruptions caused by the shutdown of Alaska's Prudhoe Bay oil field. Crude oil for September delivery today closed at $76.31 in New York, down 0.9 percent from its second-highest close ever. Oil today climbed as high as $77.45.

European stocks failed to sustain gains after a U.S. report showed labor costs in the world's biggest economy accelerated at the fastest pace since the end of 2004, indicating inflation risks persist. The Dow Jones Stoxx 600 Index closed 0.1 percent higher at 324.44 after earlier adding as much as 0.6 percent. The Stoxx 50 slipped less than 0.1 percent, while the Euro Stoxx 50, a measure for the 12 nations sharing the euro, rose 0.3 percent. Even as rates remain unchanged in Europe's largest export market, European companies face higher borrowing costs at home. Last week, central banks raised rates in the euro zone, the U.K. and Denmark.

Brazil's Bovespa rose 148.88 points, or 0.4 percent, to 37,548.67 at 3:40 p.m. New York time, while Mexico's Bolsa fell 65.83 points, or 0.3 percent, to 20,346.66. The indexes in Argentina, Chile, Venezuela and Peru also lost ground. The Morgan Stanley Capital International Index of Latin American shares was little changed, down 0.1 percent to 2461.94.

Asian stocks rose in U.S. trading, led by Japanese shares including Toyota Motor Corp. after the Bank of Japan reported that bank lending climbed at the fastest pace in a decade. The Nikkei 225 Stock Average rallied 310.60 points, or 2.1 percent, to 15,464.66 at the 3 p.m. close in Tokyo. The broader Topix index added 22.61 points, or 1.5 percent to 1562.73. The Nikkei slid 2.2 percent yesterday and the Topix lost 2 percent, in their biggest declines since July 18.

The Canadian dollar moved up 0.52 of a cent to 89.15 cents US.