TSX jumps 126 points as traders await details of Greek referendum

“The truth is that when people came in this morning, they saw that Europe was hanging in there, the European markets were by and large higher,” said Norman Raschkowan, North American strategist for Mackenzie Financial Corp.

“People took some comfort from the fact that Europe has calmed down a bit, so that set sort of a positive tone for the session.”

The Canadian dollar moved up 0.51 of a cent to 98.66 cents US. The loonie had plunged more than two cents Tuesday after the surprise announcement by Papandreou sent traders to the safe haven of the U.S. dollar.

New York markets were positive as the U.S. Federal Reserve announced at the end of a two-day meeting that it would continue to hold the line on interest rates near zero. But the Fed also is holding off on any new actions to help the economy because stronger growth is giving it time to gauge the impact of steps it has already taken.

Federal Reserve chairman Ben Bernanke later told a news conference that the central bank is looking for growth and the job market to improve gradually over the next two years, but at a sluggish pace. Bernanke cited the debt crisis in Europe as a particular concern, saying it could have adverse effects on confidence and growth.

The Dow industrials jumped 178.08 points to 11,836.04. The Nasdaq ran up 33.02 points to 2,639.98 while the S&P 500 index was up 19.62 points to 1,237.9.

The Fed’s latest forecast, released Wednesday, predicted that the economy will grow no more than 1.7% for all of 2011. For 2012, growth will range between 2.5% and 2.9%. Both forecasts are roughly a full percentage point lower than the Fed’s projections from June.

Papandreou’s unexpected call for a public vote on the aid package came just before the leaders of the world’s largest industrial and developing nations gather for the G20 economic summit in Cannes, France, on Thursday and Friday. Investors worry Greeks are fed up following a string of painful tax increases and drastic government spending cuts and will vote against an economic austerity plan. That could in turn result in havoc in the region’s financial sector and even help to push the global economy back into recession.

The announcement also came just five days after European officials outlined a plan to deal with the fact that Greece cannot pay its debts on time. The three-pronged strategy involved boosting a bailout fund, getting private creditors to take a bigger hit on their Greek debt holdings and forcing banks to raise more capital.

“The only reasonable explanation for this referendum out of the blue is, since the details of what Greece would have to abide by haven’t been set yet, he’s hoping that this way Europe gives him a bit of a break,” added Raschkowan.

Papandreou also has to survive a confidence motion on Friday and analysts say that is by no means guaranteed. A revolt in his government could scuttle the Greek referendum, which would be an enormous relief to investors.

The weaker U.S. dollar helped commodity prices claw back losses from the previous session. A weaker greenback usually helps lift commodity prices, which are denominated in U.S. dollars, as it makes oil and metals more attractive to holders of other currencies.

The TSX energy sector gained 1.53% as the December crude contract on the New York Mercantile Exchange gained 32 cents to US$92.51 a barrel. Suncor Energy (TSX:SU) gained 87 cents to C$31.79 while Cenovus Energy (TSX:CVE) climbed 64 cents to $34.09.

Metal prices advanced as the December copper contract on the Nymex gained eight cents to US$3.58 a pound, pushing the mining sector up 2.6%. Teck Resources (TSX:TCK.B) advanced 96 cents to C$39.05 and First Quantum Minerals (TSX:FM) rose 77 cents to $20.50.

The gold sector rose over one per cent as bullion moved higher while the December gold contract in New York rose $17.80 to US$1,729.60 an ounce. Barrick Gold Corp. (TSX:ABX) rose 88 cents to C$51.18 and Goldcorp Inc. (TSX:G) climbed $1.40 to $51.35.

The financial sector also lifted the Toronto market, rising almost one per cent as Manulife Financial (TSX:MFC) shares gained 13 cents to $12.55 and Scotiabank (TSX:BNS) rose 90 cents to $51.97.

European markets made strong gains after steep losses Tuesday with London’s FTSE 100 index ahead 1.25%, Frankfurt’s DAX was ahead 2.25% and the Paris CAC 40 climbed 1.38%.

Markets were also supported in part by encouraging labour news two days before the release of the U.S. non-farm payrolls report for October. Automatic Data Processing said that company payrolls rose by 110,000 in October. Most of the gains came from the service industry. ADP also revised higher its survey results for September.

In earnings news, Talisman Energy Inc. (TSX:TLM) shares gained 42 cents to $14.19 as it reported that its net income jumped by nearly half in the latest quarter to $521 million as the company generated from higher prices and output. Revenues rose 17% to nearly $1.95 billion.

Shares in Canada’s fourth-largest insurer, Industrial Alliance Insurance and Financial Services Inc. (TSX:IAG) fell $3.52 or 10.9% to $28.76. The company saw its profits take a 28% battering in the third quarter as financial market turbulence and low interest rates combined to hamper profitability at its individual insurance and wealth management businesses.

Canadian-American beer producer Molson Coors (TSX:TAP) (NYSE:TAP) said third-quarter net income tumbled 23% to US$197.4 million because of higher costs, the poor economy in the United States and surprisingly weak sales in the U.K. Its shares were down $1.31 to US$39.02 in New York.