TSX higher as European leaders agree on new budgetary pact

The S&P/TSX composite index gained 82.95 points to 12,034.75 after most members of the European Union signed on to a deal to ensure there is no repeat of the current European debt crisis. Britain was the lone holdout, arguing the treaty wasn’t in its best interest.

The TSX Venture Exchange rose 29.93 points to 1,547.31.

The Canadian dollar reversed early weakness and rose 0.4 of a cent to 98.19 cents US.

On the corporate level, the TSX focused on telecom giants Rogers Communications Inc. (TSX:RCI.B) and BCE Inc. (TSX:BCE). They will acquire a combined 75% stake in Maple Leaf Sports and Entertainment, owner of the Toronto Maple Leafs, in a deal that will pay $1.3 bilion to the Ontario Teachers Pension Plan, the current majority owner.

MLSE also owns the NBA’s Toronto Raptors, Major League Soccer’s Toronto FC, the Air Canada Centre and other assets. BCE shares edged 14 cents higher to $40.74 while Rogers shares lost 19 cents to $36.76.

U.S. markets surged as the Dow industrials ran ahead 186.56 points to 12,184.26.

The Nasdaq index was ahead 50.47 points to 2,646.85 and the S&P 500 index gained 20.84 points to 1,255.19.

The new eurozone treaty calls for participating governments to have balanced budgets, which is calculated as a structural deficit no greater than 0.5% of gross domestic product and will require constitution amendments to include such a requirement. An unspecified “automatic correction mechanism” would punish countries which break the rules.

In addition, countries that run deficits larger than three per cent, would face sanctions.

Analyts said while the treaty proposal didn’t meet everyone’s expectations, it certainly represented progress.

“We have been far enough down this road to realize that one meeting isn’t going to solve everything,” said Colin Cieszynski, market analyst at CMC Markets Canada.

“At least this time around, they seem to have gotten to the point where they have taken it fairly seriously, they have brought in real measures that have to be taken care of and it looks like they’re trying to accelerate the ratification process.”

Meanwhile, many think that a solution to the debt crisis can only come if the European Central Bank takes a more active role, possibly by buying up more government debt in the markets. It currently buys bonds in the markets, but only reluctantly and in small quantities.

On Thursday, ECB president Mario Draghi suggested Thursday he had no intention of increasing bond purchases.

And he said he was surprised by some interpretations of his comments last week that “additional steps” would be taken if the 17 countries that use the euro agreed to closer budget controls.

Draghi’s comments sent the TSX tumbling 197 points Thursday while the Dow fell 199 points.

Relief that EU countries have taken a big step forward in resolving the debt crisis left the TSX off just 40 points for this week after optimism about the summit pushed the market up over 600 points or five per cent last week.

European markets were higher Friday, with London’s FTSE 100 index ahead 0.83%, Frankfurt’s DAX up 1.91% and the Paris CAC 40 up 2.48%.

While European leaders worked to contain the region’s debt crisis, investors also looked to reminders that the global economy is facing slower growth, including further evidence that China’s economy is losing steam.

Inflation declined to 4.2% in November from 5.5% the month before, a move which will allow Chinese authorities more flexibility in easing policies that were imposed to cool the overheated economy but now may pose a threat to growth.

At the same time, the National Bureau of Statistics reported that China’s industrial output rose 12.4% in November, its slowest increase in two years.

Traders also took in a report that China is launching a new $300-billion fund that will invest partially in Europe.

China has played a key role in supporting a fragile global economic recovery. This has been especially beneficial for the Toronto stock market as its increasing demand for oil and metals has pushed commodity prices higher and boosted the shares of resource companies.

Commodity prices were mixed as the base metals sector led TSX advancers, up 2.4% with the March copper contract ahead six cents to US$3.56 a pound. Teck Resources (TSX:TCK.B) gained 56 cents to C$37.92 while First Quantum Minerals (TSX:FM) was up $1.05 at C$20.55.

The energy sector gained 1.34% with the January crude contract on the New York Mercantile Exchange ahead $1.07 at US$99.41 a barrel. Suncor Energy (TSX:SU) gained 31 cents to C$ while Canadian Natural Resources (TSX:CNQ) was up 58 cents to C$37.66.

The financial sector advanced 0.8% with Manulife Financial (TSX:MFC) ahead 16 cents to $11.32 and Royal Bank (TSX:RY) rising 66 cents to $49.47.

The gold sector was also higher as the February bullion contract closed up $3.40 to US$1,716.80 an ounce. Agnico Eagle Gold Corp. (TSX:AEM) was ahead 66 cents to C$43.98 while Kinross Gold Corp. (TSX:K) improved by 12 cents to $13.61.

In other corporate news, a spokesman for the Maple Group isn’t confirming a report that the consortium of financial institutions has hit a roadblock in its plan to buy and combine the Toronto Stock Exchange with a smaller, bank-owned trading system.

A Globe and Mail online report cited unnamed sources as saying there was a disagreement over how much it would cost Maple to acquire the Alpha trading system and combine it with TMX Group (TSX:X), which operates Canada’s largest stock and derivatives market. TMX Group was up 28 cents to $43.

Dow component DuPont revised its full-year outlook lower, citing global economic uncertainty. Its shares were down 3.18% to US$45.04.

The company is viewed as a bellwether for the overall economy as its chemicals are used in a wide range of products, including electronics, cars, paint, plastics, and agriculture.