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At midday: TSX higher as banks, consumer stocks rise

A man walks past an old Toronto Stock Exchange (TSX) sign in Toronto, June 23, 2014. (Mark Blinch/Reuters)

Canada’s main stock index rose higher on Wednesday led gains for financial stocks and grocery operator Empire Co Ltd.

The most influential movers on the index were the big financial stocks, which rose as investors increased their bets that the country’s central bank may hike interest rates as soon as next month.

Royal Bank of Canada was up 1 per cent at $95.02 and Bank of Montreal also gained 1 per cent to $95.17, while the financials group gained 0.46 per cent overall.

Interest rate cuts in 2015 have done their job and the Bank of Canada needs to consider its options as excess capacity is used up, Bank of Canada Governor Stephen Poloz said in a CNBC interview in Europe.

Food retailer Empire advanced 10.3 per cent to $21.07. The parent of the Sobeys grocery chain, which is in the midst of a turnaround effort, posted adjusted earnings that beat expectations and increased its dividend payout.

On the other side of the ledger, Gildan Activewear shares fell 3.4 per cent to $39.98 after one of its directors resigned to take up the chief operating officer role at Under Armour, and as CIBC downgraded the stock to ‘neutral’ from ’outperform’.

Eldorado Gold Corp lost 4 per cent to $3.56 after reducing its 2017 outlook for production from its Kisladag operations in Turkey, while larger gold miners also fell.

At 11:19 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 57.68 points, or 0.38 per cent, to 15,338.90.

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The energy group fluctuating and sat up 0.5 per cent, with Suncor Energy declining 0.1 per cent to $38.45 and pipeline operator Enbridge Inc largely unchanged at $52.76.

The materials group, which includes precious and base metals miners and fertilizer companies, erased early losses and sat flat.

Nine of the index’s 10 main groups were in positive territory.

Brookfield Renewable Partners L.P fell 4.6 per cent to $41.47 after announcing a $550-million equity offering.

Wall Street was higher in late morning trading on Wednesday as financial and consumer stocks led a broad rally among the major sectors.

Bank stock reflected a rise in treasury yields, following a Reuters report that the market had overinterpreted chief Mario Draghi’s comments that the ECB was ready to start withdrawing the emergency stimulus for the economy.

The sources clarified that Mr. Draghi intended to signal tolerance for a period of weaker inflation, not an imminent policy tightening.

The financial index’s 1.16-per-cent rise led the gainers, with Bank of America, JPMorgan and Citigroup all up more than 1 per cent.

The consumer discretionary index rose 0.9 per cent, helped by a gain in Walt Disney, Comcast and Amazon.

The Dow Jones Industrial Average was up 126.57 points, or 0.59 per cent, at 21,437.23, the S&P 500 was up 18.26 points, or 0.75 per cent, at 2,437.64.

The Nasdaq Composite was up 54.76 points, or 0.89 per cent, at 6,201.38.

With investors awaiting second-quarter corporate earnings, equity valuations have come under focus at a time when inflation remains low, recent economic data has been tepid and President Donald Trump’s pro-growth policies face delays. The S&P 500 is trading at nearly 18 times forward earnings estimates, well above its long-term average of 15 times.

“Valuations are certainly a little bit elevated and they are a bit of a concern,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

“We saw valuations run up in the first quarter but then when earnings came out they were pretty solid so ultimately if earnings continue at the rate we’ve seen recently, then those valuations will be fine.”

Federal Reserve Chair Janet Yellen said on Tuesday that by standard metrics, some asset valuations look high while Vice Chair Stanley Fischer warned that central bank must remain vigilant in monitoring financial stability risks.

San Francisco Fed head John Williams said investors may be getting overly complacent about risks and that “the stock market seems to be running pretty much on fumes.”

Meanwhile, Trump administration’s ability to deliver on election promises came under focus on Tuesday after a planned vote on Republican healthcare bill to dismantle the Affordable Care Act was put off to after the Senate’s July 4 recess.

The healthcare legislation is the first plank of President Trump’s domestic policy agenda, with investors eager for him to move onto his other plans, including tax cuts and infrastructure spending.

Oil prices rose about 1 per cent but concerns remained that a three-year supply glut is far from over.

KB Home was up 3.2 per cent at $23.54 after the homebuilder increased its full-year forecast.

General Mills rose 2.3 per cent to $56.81 after the Cheerios maker’s quarterly profit beat estimates.