Gold merger seen boosting Toronto stocks

Toronto's main stock market index was seen adding to Wednesday's gains on Thursday as rising metal and energy prices and a bid for Meridian Gold (MNG.TO: Quote) shines the spotlight on the resource-heavy market.

The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> begins the day at 13,741.92 after climbing 78.04 points on Wednesday to end a three-day losing streak that saw the main index shed more than 430 points.

"We got a bounce yesterday and that was badly needed," said John Ing, president at Maison Placements Canada. "Gold is up and that will be a better opening."

Gold steadied at $646.40 an ounce on Thursday after touching a three-month low of $638.90 ahead of the U.S. Federal Reserve's decision on interest rates.

Yamana Gold Inc. (YRI.TO: Quote) said late on Wednesday it would buy Northern Orion Resources Inc. (NNO.TO: Quote) for $1 billion, and then bid $3 billion for Meridian Gold (MNG.TO: Quote).

That would create a gold producer with a strong presence in Latin America. It would produce 1.4 million ounces of gold per year by 2009 and control six South American mining and development projects.

Oil shares are also expected to boost the market after the price for U.S. crude oil rose 0.6 percent to $69.38 a barrel on concern about dwindling gasoline and distillate inventories.

Petro-Canada (PCA.TO: Quote) could attract attention after it said its Fort Hills oil sands project is expected to cost C$14.1 billion ($13.2 billion) as it wrestles with surging costs.

The company said the first phase of the northern Alberta oil sands mining and synthetic crude processing operation will produce 140,000 barrels a day from 2011, rising to 280,000 barrels per day of synthetic crude oil by 2015.

But trade volume is expected to be choppy ahead of the Federal Reserve's interest rate decision in the afternoon.

The U.S. Federal Reserve is widely expected to keep interest rates steady at 5.25 percent, but traders will watch the accompanying statement closely.

Volatility could also be a factor ahead of quarter end.

Investors are also waiting for more developments in the auction for BCE Inc. (BCE.TO: Quote). The bid deadline is widely believed to have passed on Tuesday morning.

($1=$1.06 Canadian).

source:ca.today.reuters.com