Source: The Canadian Press

The Toronto stock market closed at a three-and-a-half month high Wednesday, led by energy and mining companies after strong manufacturing figures from the U.S. and China raised hopes for improved economic activity and higher demand.

The S&P/TSX composite index closed up 89.92 points to 12,003.78 while the TSX Venture Exchange rose 18 points to 1,517.63.

The Canadian dollar moved up 1.3 cents to 95.06 cents US.

Gains on markets accelerated after the U.S. Institute for Supply Management’s manufacturing index showed the sector expanding at a stronger pace in August, rising to 56.3 from 55.5 in July. Economists had expected a much more modest reading of 53.

“Given the sharp deterioration in many of the various regional activity surveys, we were worried about an even bigger drop,” said Paul Ashworth, senior U.S. economist at Capital Economics Ltd..

“It is encouraging to know that the manufacturing recovery may not have collapsed after all.”

Investor sentiment was already positive at the start to the trading day after a report showed manufacturing growth in China rising in August for the first time in four months. The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index — a gauge of business activity — rose to 51.7 in August from 51.2 in July.

The base metals sector was the biggest advancer, rising 5.77% with the December copper contract on the New York Mercantile Exchange up 11 cents at US$3.48 a pound. Teck Resources (TSX:TCK.B) moved ahead $1.97 to C$37.64 and Western Coal Corp. (TSX:WTN) improved by 35 cents to C$4.35.

Railway stocks ran ahead alongside the metals sector with Canadian National Railways (TSX:CNR) up $1.22 at $66.29.

Transportation giant Bombardier Inc. (TSX:BBD.B) also boosted the industrials sector even as it reported that second-quarter profits dropped to US$148 million from US$202 million a year earlier on lower sales. Its stock was up 16 cents at C$4.60.

The TSX energy sector advanced 1.92% as oil prices picked up after two days of sharp declines following the release of the manufacturing data. Hopes for higher demand pushed the October crude contract on the New York Mercantile Exchange up $1.99 to US$73.91 a barrel. Suncor Energy (TSX:SU) gained $1.42 to C$33.73 while Canadian Natural Resources (TSX:CNQ) climbed 80 cents to C$35.10.

The financial sector was ahead 1.27% as Royal Bank (TSX:RY) gained $1.04 to $52.04 and Manulife Financial (TSX:MFC) jumped 66 cents to $12.53. TD Bank (TSX:TD), which reports quarterly earnings Thursday, drifted three cents lower to $72.12.

The gold sector was the major decliner as the December contract in New York fell $2.20 to US$1,248.10 an ounce. Barrick Gold Corp. (TSX:ABX) declined $2.25 to C$47.70 and Goldcorp Inc. (TSX:G) faded $1.60 to C$45.70.

Meanwhile, investors also took in some soft employment data two days before the U.S. government releases its August non-farm payrolls report. The monthly jobs survey from the ADP payrolls firm showed that the private sector ditched 10,000 jobs in August. The markets had expected the ADP report to show that around 20,000 private payroll jobs had been added.

New York’s Dow Jones industrials surged 254.75 points to 10,269.47.

The Nasdaq composite index jumped 62.81 points to 2,176.84 while the S&P 500 index ran up 30.96 points to 1,080.29.

The rise on markets that followed the strong economic data was an encouraging start to what is historically the worst trading month of the year.

“You’re getting down towards the end of the year, people start making adjustments to portfolios and looking for things to worry about and how do you clean this up and move on,” said Fred Ketchen, manager of equity trading at Scotia Capital.

“You get to the point where you say ‘If I’m going to do it by year-end, I better start now.”’

In other corporate news, Husky Energy Inc. shares gained 30 cents to $25.14 after it agreed to buy natural gas lands in west-central Alberta from Talisman Energy Inc. (TSX:TLM) in a deal one analyst estimated could be worth up to half a billion dollars, doubling its operations in the region as it focuses on boosting near-term production growth.

Convenience store operator Alimentation Couche-Tard (TSX:ATD.B) shares rose 91 cents to C$23.80 as the company again increased its bid for Casey’s General Stores in the U.S., this time by 50 cents to US$38.50 per share in cash. The Montreal-area company also said it has secured financing of up to US$1.5 billion.

Apple Inc. shares moved up $7.223 or 2.97% to US$250.33 in New York as CEO Steve Jobs announced a new line of iPods, including a Nano model that has a touch screen and lacks buttons. Jobs also said iPhone users will be getting a software update that offers the ability to upload high-definition video over Wi-Fi.

The Wall Street Journal reported that Burger King Holdings Inc. is discussing a possible sale of the company with private-equity firms. Burger King is the second-largest hamburger chain after McDonald’s Corp. but is faring worse than its rival in a weak economy. Its shares jumped 14.5% to US$18.85.