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Best Week For TSX Since Late August

The Toronto stock market registered a solid gain Friday at the end of a positive week as share prices continue to recover from a sharp sell-off earlier this month. The S&P/TSX composite index ran up 56.99 points to 14,543.82 and the Canadian dollar was unchanged at 89.02 cents US. New York markets were also higher with the Dow Jones industrials ahead 127.51 points to 16,805.41, the Nasdaq climbing 30.93 points to 4,483.72 and the S&P 500 index gaining 13.76 points to 1,964.58. Markets have continued to claw back losses from the recent sharp sell-off.

The Toronto stock market just had its best week since late August with a gain of 316 points or 2.2 per cent, leaving it down seven per cent from its highs of early September. The TSX is still up 6.75 per cent year to date. The Dow industrials gained 425 points or 2.6 per cent this week and the blue chip index is also well off the worst of the retracement, down just 2.75 per cent from its most recent record high Sept. 19. Traders were encouraged as worries about the global economy lessened. “We’re closer to the end of this than the beginning,” said Bob Gorman, chief portfolio strategist at TD Waterhouse. “People ask if its the start of a bear market – I say, no, this is simply a long overdue correction in a bull market and I think that, at the end of the day, earnings growth will be decent but not great and this will prevail and I think we’re going higher.”

 

Should Ottawa Use Surplus For Tax Cuts?

Canada’s budget watchdog says the country is on track to run a $3.6-billion surplus in 2014 to 2015, delivering a balanced budget a year earlier than government predictions.  However, a report released by Parliamentary Budget Officer Jean-Denis Frechette urges Ottawa to proceed with caution when it comes to using surplus cash on new spending initiatives or to introduce permanent  tax cuts. If not, Frechette warns the government risks falling back into deficit once economic growth slows.

The Harper government has pledged to cut taxes ahead of next year’s election. “Policy-makers should be wary of using surpluses to implement permanent tax relief or spending initiatives if they wish to avoid returning to deficits as economic growth subsides,” says the PBO’s latest economic and fiscal outlook.  The budget office predicts balanced budgets through 2019 to 2020 when it says the federal surplus will reach as high as $11.3 billion. During that time, it expects average annual surpluses of about $10 billion, which can be used for repaying debt, boosting program spending and cutting taxes.  Canada’s economic outlook has improved faster than expected in recent months, the budget office report says. It found the country’s real GDP was stronger than expected and it predicts further growth due to the improving U.S. economy.

 

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Sources; Bloomberg; Investment Executive; TD Waterhouse; advisor.ca