Toronto, New York markets surge

The president of the European Commission said Wednesday that banks should temporarily increase their capital buffers to better withstand the crisis. Jose-Manuel Barroso said if banks can’t raise the capital on the market, they should get help from governments, who in turn can ask for capital from the eurozone bailout fund.

Barroso also called for a permanent bailout fund, the European Stability Mechanism, to come into force in mid-2012, one year ahead of schedule.

Separately, a Slovakian opposition party leader said that country’s political parties have agreed to approve a deal to strengthen Europe’s financial rescue program. Slovakia’s parliament blocked the deal Tuesday, setting back efforts to free up more funds for indebted European countries and banks. The other 16 countries that use the euro have all approved the measure.

Higher commodities and a willingness to take on more risk took the Canadian dollar up 1.01 cents to 98.3 cents US.

U.S. markets were also higher with the Dow industrials ahead 102.55 points to 11,518.85, the Nasdaq was up 21.7 points to 2,604.73 and the S&P 500 index rose 11.71 points to 1,207.25.

Markets have been buffeted by strong headwinds since early August arising from worries that a worsening European debt crisis could derail a fragile global economic recovery. Indexes have plunged sharply as investors also worry that European banks aren’t strong enough to withstand a disorderly debt default by Greece.

Barroso’s comments were greeted with skepticism from some analysts since markets have felt let down by a frequent lack of European action recently on the debt crisis.

“The Europeans continue to talk a good game but when it comes to actually doing something, they’re always a day late and a euro short,” said Gavin Graham, president of Graham Investment Strategy.

“We have had this script a half a dozen times before over the last couple of months, which is one of the reasons why we went into bear market territory and had the big falls in markets a week or so ago.”

Meanwhile, the third-quarter earnings season in the U.S. got off to a disappointing start after aluminum producer Alcoa reported on Tuesday that its net income fell far short of expectations.

Oil prices snapped a five-session run of gains that sent oil up 7.7% as the November crude contract on the New York Mercantile Exchange slipped 24 cents to US$85.57 amid a lowering of growth forecasts by the International Energy Agency.

The IEA said it was now expecting global demand to rise to 89.2 million barrels a day this year — one million barrels more than in 2010 — and to 90.5 million barrels a day in 2012. Compared with last month’s forecasts, these revisions were lower by 50,000 barrels a day for 2011.

The energy sector rose three per cent as Suncor Energy (TSX:SU) rose 76 cents to C$29.61 and Canadian Natural Resources (TSX:CNQ) gained 83 cents to $32.04.

The base metals sector rose 3.38% as copper prices also advanced with the December contract on the Nymex ahead 10 cents to US$3.39 a pound. Teck Resources (TSX:TCK.B) climbed 74 cents to C$36.03 and First Quantum Minerals (TSX:FM) charged ahead $1.01 to $17.21.

The financials sector also supported the TSX, up 1.53% as TD Bank (TSX:TD) improved by 94 cents to $75.20 and Royal Bank (TSX:RY) gained 88 cents to $48.83.

The gold sector was slightly lower while the December contract in New York climbed $21.60 to US$1,682.60 an ounce. Barrick Gold Corp. (TSX:ABX) faded 34 cents to $48.98.

Meanwhile, the release of the minutes from the last Federal Reserve meeting cast a bit more light on its decision to shift US$400 billion of its investments to try to lower long-term interest rates. They showed that policy makers considered a third round of bond purchases at their last meeting, and at least two members said the weakening economy might require it.

On the corporate front, Research in Motion Ltd. (TSX:RIM) was again in focus as technical glitches that affected millions of BlackBerry users around the world spread to Canada on Wednesday. Widespread outages were reported for the smartphone’s text and email services for a third day. RIM said Wednesday that a technical failure in Europe likely ended up causing a huge backlog of messages worldwide for BlackBerry users and its shares fell 87 cents to $24.27.

Air Canada (TSX:AC.B) shares added a penny to $1.39 as the Canada Industrial Relations Board said the carrier’s flight attendants aren’t allowed to strike at midnight as they’ve planned to do. Labour Minister Lisa Raitt submitted two referrals to the quasi-judicial board during the afternoon, ending the possibility of a legal strike until the board completes its review.

Food and beverage company PepsiCo Inc. said its third-quarter profit rose four per cent to US$2 billion or $1.25 a share because of higher prices and strong sales of its snacks and beverages, especially overseas. Adjusted earnings came in at $1.31 a share, a penny better than expectations. Its shares gained 2.87% to US$62.70.