Canadian Stocks Rise on Vote Hopes

Investors bid up Canadian stocks Monday on hopes that Quebecers would vote against a divorce from Canada in a historic referendum.

The Toronto Stock Exchange’s main index jumped more than 40 points, traders said.

“This is the calm before the storm,” BZW Canada Ltd. trader Sonny Lennon said.

Markets were extremely volatile in light trading as Quebecers turned out in record numbers for the vote, traders said.

Trading in Canadian bonds, treasury bills, equities and foreign exchange also reflected optimism that a majority of Quebecers would choose to stay a part of Canada.

The Toronto Stock Exchange 300 index, the exchange’s main index, was little changed for most of the session, although it rallied late in the day to close up 44.51 points at 4,379.80.

The rally took place as a smaller-than-normal number of shares changed hands. On the broader TSE, 43.8 million shares traded, compared to the three-month daily average of 59.7 million shares. A total of 427 shares rose, 345 fell and 315 were unchanged.

“Most money managers are sitting on their hands,” said Murray McDonald, president of Plaza Capital Markets Ltd.

McDonald said most money managers positioned their portfolios in anticipation of a victory by the federalists.

A defeat of separatists was predicted to send the Canadian dollar higher, which would in turn let the Bank of Canada lower interest rates, traders said. Lower interest rates cut borrowing costs for companies and make more money available to individuals and businesses, which, if they borrow it to expand, spurs economic growth.

The U.S. dollar was little changed against other major currencies amid concern that political turmoil could flare should Quebecers vote to secede.

Canadian bonds and the currency rose on anticipation of a separatist defeat, analysts said.

The yield on the 30-year government bond fell 0.05 percentage point to 8.22%. Bond yields, which move inversely to bond prices, often mirror interest rates.

Eleven of the TSE’s 14 subgroups rose, led higher by a 2.35% jump in consumer products stocks, a 2.06% rise in forest products shares and a 1.75% gain in utilities issues.

The Canadian dollar rose to 73.5 U.S. cents from 73.4 cents at the opening.