Source: The Canadian Press

The Toronto stock market closed higher Monday with investors feeling relieved that China is not raising interest rates to deal with high inflation.

The S&P/TSX composite index closed up 56.39 points at 13,295.86, well off early highs as gains in base and precious metal stocks moderated in the afternoon. The TSX Venture Exchange climbed 6.45 points to 2,130.75.

The Canadian dollar gained against the U.S. dollar, up 0.17 of a cent to 99.24 cents US.

Positive economic news also gave lift to the loonie. Statistics Canada reported that Canadian industries operated at 78.1% of production capacity in the third quarter, up from 76.9% in the second quarter. The agency said the improvement was driven by the manufacturing sector.

Investors had been concerned going into this past weekend that China would raise interest rates to deal with inflation that surged to a 28-month high of 5.1% in November.

That again raised worries that the country’s economy could slow. But instead, the central bank ordered another increase in banks’ capital reserves on Friday in its latest move to reduce excess liquidity.

Traders were also encouraged by the outcome of China’s annual economic planning meeting, where leaders affirmed their determination to fight inflation while also keeping growth on track.

“Much rather have the Chinese and the People’s Bank of China raising reserve requirements if need be than to let (inflation) get out of hand,” said Gavin Graham, global strategist at Excel Funds Management.

“One would much rather see the authorities being proactive.”

Strong economic growth in China has helped push the resource-heavy Toronto stock market up about 13% year to date as oil and metal stocks have benefited from rising demand for commodities.

A weaker U.S. dollar also helped send the January crude contract on the New York Mercantile Exchange up 82 cents to US$88.61 a barrel, pushing the energy sector up 1%. Suncor Energy (TSX:SU) was ahead 43 cents at C$36.63 while Canadian Natural Resources (TSX:CNQ) gained $1.02 to $43.26.

Metal prices also advanced with the March copper contract on the Nymex ahead 10 cents at US$4.21 a pound.

The base metals segment edged up 0.24% with Quadra FNX Mining (TSX:QUX) advancing 90 cents to $16.04.

Ivanhoe Mines (TSX:IVN) shares jumped 49 cents to $24.73 as it said it has approved a US$2.3-billion capital budget for ongoing construction at its Oyu Tolgoi copper and gold mine in Mongolia. The Vancouver-based miner holds a 66% stake in the mine, while the Mongolian government holds the remaining 34%.

Gold stocks were mixed while the February bullion contract in New York rose $13.10 to US$1,398 an ounce. Barrick Gold Corp. (TSX:ABX) improved by 49 cents to $54.32 and Kinross Gold Corp. (TSX:K) declined 14 cents to $18.46.

Gold Wheaton Gold Corp. (TSX:GLW) shares were ahead, 61 cents or 13.93%, at $4.99 after the company announced that it will be acquired by Franco-Nevada Corp. (TSX:FNV) for $830 million in cash and shares. Franco-Nevada shares slipped $1.26 to $32.15.

Kirkland Lake Gold Inc. (TSX:KGI) was added to the S&P/TSX composite index Monday. Its shares lost 38 cents to $14.96.

The financial sector also supported the Toronto market, up 0.52% with Scotiabank (TSX:BNS) ahead 56 cents at $56.56 while Sun Life Financial gained 66 cents to $30.18.

Royal Bank of Canada (TSX:RY) is acquiring Loudoun Capital Partners, a boutique financial advisory group in Europe for an undisclosed amount. Its shares rose seven cents to $52.82.

Telecom stocks were the biggest TSX drag as Rogers Communications (TSX:RCI.B) backed away 67 cents to $34.88.

New York markets were mixed amid expectations that a tax cut package will pass the Senate.

The Dow Jones industrial average gained 18.24 points to 11,428.56, while the Nasdaq composite index lost 12.63 points to 2,624.91 and the S&P 500 index inched up 0.06 of a point to 1,240.46.

There was other major dealmaking for investors to take in.

U.S. conglomerate GE is buying British oil and gas services group Wellstream Holdings PLC for 800 million pounds (US$1.3 billion) to bolster its energy unit. GE said Monday that Wellstream intends to unanimously recommend the deal to shareholders.

Wellstream, which manufactures pipes for the oil and gas sector, has previously rejected two lower offers from GE and had received approaches from other unnamed suitors. GE shares dipped 10 cents to US$17.62.

Dell said it has a deal to buy the data storage company Compellent Technologies for US$884 million. The offer price is slightly more than Dell Inc. said it would pay last week, before the companies had signed a formal agreement. Dell says it will pay US$27.75 per share for Compellent Technologies Inc., up from US$27.50. Dell shares fell 54 cents to US$13.35.

Priszm Income Fund (TSX:QSR.UN) says it’s selling off its 232 restaurants in Ontario and British Columbia to a numbered company owned by a European franchisee of Yum! Restaurants International for about C$46.4 million. Units in the operator of most of Canada’s KFC, Taco Bell and Pizza Hut restaurants were down 9.5 cents or 33.33%, at 19 cents.