TSX up as U.S. investors rush to buy

The S&P/TSX composite index in the past month

The TSX moved up Monday, adding 3.5 per cent, or more than 280 points, to the 430-point gain on Friday.

The markets were evidently reacting to a massive government support package announced Sunday for troubled U.S. financial institution Citigroup, and the announcement about president-elect Barack Obama's economic team. The British government also said it was introducing a stimulus package.

The benchmark S&P/TSX composite index closed up 285.48 points at 8,440.87, led by energy, diversified metals and telecommunications issues. In New York, the Dow Jones industrial average was up 4.9 per cent or 396.97 points to 8,443.39.

The TSX gain clawed back the losses late last week, leaving the composite about where it was on Wednesday.

Energy issues rose with a surge in the price of a barrel of light, sweet crude for January delivery. The price was up almost 10 per cent or $4.57 US to $54.50 on the New York Mercantile Exchange.

The oil price rise may also explain the jump in the loonie, which closed up 2.7 cents at 81 cents US.

In New York, Citigroup added $2.18 US to $5.95, recovering more than a third of the amount the stock fell last week. The Citigroup announcement also boosted the share price of Canadian telecom giant BCE, which is awaiting the closing of a $52-billion takeover by a group of investors led by the Ontario Teachers' Pension Plan.

Citigroup is an important lender to the deal, and concern about its ability to deliver had kept BCE stock moving up and down, but nowhere close to the $42.75-a-share takeover offer. After the announcement, BCE added 9.8 per cent or $3.39 to close at $37.94.

Negatives abound

On the downside, there is still fear that the world economy is in for a long period of shrinkage — 18 months, in fact, according to world leaders who were at the Asia-Pacific Economic Cooperation forum in Lima on the weekend.

There was also continuing bad news from companies such as miner Novagold, which said Monday that it was $20 million over budget on several projects, had not been able to arrange bank financing, and was being pressed by partners to make payments on one project.

The company is considering restructuring alternatives, it said in a news release. Novagold stock, which has been as high as $19.99 in the past year, crashed $1.48 to 72 cents.

European markets surged as much as 10.3 per cent after the British announcement.

Asian markets, however, mostly fell.