Toronto stock market closes up 177 points

The Canadian dollar rose 0.79 cents to 97.06 cents US after data showed Canada’s inflation was in line with expectations in November.

The annual inflation rate remained relatively high at 2.9% last month as Canadians continued to pay considerably more for food and gasoline than they had 12 months earlier.

Statistics Canada said Tuesday that grocery prices were up 5.7% in November compared with a year earlier as consumers saw double-digit increases for such basics as fresh vegetables and bread. The figures included a 1.3% jump from October alone.

Meanwhile, commodities made gains with the January oil contract adding $3.34 to US$97.22 a barrel.

The February gold contract was up $20.90 to US$1,617.60 an ounce, while the March copper contract gained six cents to $3.37 a pound.

On the TSX, the mining index was up 3.3%, the energy index added 2.2% and the gold index pushed 3% higher.

Tuesday’s bounce-back from an almost 100-point loss on Monday was seen as a result of improved sentiment about the European and U.S. economies. However, volatility could persist as the holiday season approaches and trading thins, said Colin Cieszynski, a market analyst at CMC Markets Canada.

“Overall, markets remain essentially range bound with tax-loss and pre-holiday selling offset by year-end short covering and bargain hunting,” he said.

“Moderate swings back and forth such as these may continue through the rest of the week.”

Wall Street was also positive with the Dow Jones up 337.17 points at 12,103.43, while the broader S&P 500 was up 35.95 points at 1,241.3 and the Nasdaq rose 80.59 points at 2,603.73.

The U.S. Federal Reserve announced Tuesday afternoon that the largest U.S. banks and financial companies should hold extra cash on their balance sheets to cushion themselves against financial crises. American banks opposed the rules, saying they would be forced to hold too much extra cash, hampering their ability to make loans.

Earlier, the U.S. Commerce Department said builders broke ground on a seasonally adjusted annual rate of 685,000 homes last month, a 9.3% jump from October. It’s the highest level since April 2010. Still, the rate is far below the 1.2 million homes that economists say would be built each year in a healthy housing market.

Meanwhile, German business confidence rose unexpectedly in December, while German consumers were resilient in the face of rising economic risks and the ongoing debt crisis.

Spain’s weekly auction of short-term debt was also encouraging for investors. Borrowing costs for three- and six-month notes fell sharply amid strong demand, indicating market confidence in the country’s ability to handle its debt is recovering.

The reassuring macroeconomic news reinforced improving market sentiment as the leadership succession in North Korea appeared to be under control.

In domestic news, steel pipe and tubing maker Lakeside Steel Inc. (TSXV:LS) shares jumped 279% or 19.5 cents to 26.5 cents after it announced it has received a $77.5-million takeover bid, worth 40 cents per share, from an unidentified buyer, more than four times its market price before the offer was made.

TransCanada Corp. (TSX:TRP), a major pipeline operator and power producer, has expanded its alternative energy business with a deal to buy nine solar power projects in Ontario for $470 million. Shares added 29 cents to $43.73.

Prime Restaurants Inc. (TSX:EAT) announced Tuesday that it will be paying a special dividend of eight cents per class A limited voting share in connection with the takeover of the company by Fairfax Financial Holdings Ltd. (TSX:FFH). Prime shares added seven cents to $7.55, while Fairfax shares were up $9.52 at $427.50.

The global real estate arm of Manulife Financial Corp. (TSX:MFC) has bought $555 million worth of properties in Toronto, San Diego and the New York City area. One of the three vendors was Ivanhoe Cambridge, the real estate arm of the Caisse de depot et placement du Quebec, which sold the York Mills Centre office complex in Toronto for $161 million.