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Bulls rushing into Canada's 'Big Six' banks with C$52b surge

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Bank of Canada governor Stephen Poloz said in an interview that the economy is doing well overall, driven by housing and services, while inflation is on target.

Toronto

CANADA'S biggest banks are finally pulling their weight.

Shares of the nation's largest lenders, known as the "Big Six", are staging a comeback amid the central bank's resistance to cutting interest rates. Over the last three months, the stocks have climbed 12 per cent - almost doubling the rally in the country's benchmark equity index - for an increase of C$52 billion (S$53.3 billion) in value.

Canadian banks have rallied in November even after some disappointing economic reports. While the nation is nowhere near peak growth, data so far this year has been strong enough to keep policy makers from lowering borrowing costs. A report on Friday showed retail sales beat economist estimates, reinforcing the Bank of Canada's view that the consumer remains resilient despite global trade tensions.

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The strong economic data and the absence of rate cuts are "all very positive news for the Canadian banking sector, and over the past few months, have translated into solid market gains", Meny Grauman, an analyst at Cormark Securities, said in a note.

Another potential driver for the shares is the banks' upcoming fiscal fourth-quarter results. They are expected to post an average 4 per cent increase in adjusted earnings-per-share, according to the median of estimates compiled by Bloomberg. That's down from the average of 5.2 per cent growth reported in the previous quarter.

"The banks, because of the positioning that they have in Canada, are kind of a protected species," said John Kinsey, a money manager at Caldwell Securities in Toronto. "They seem to do rather well no matter what."

Prime Minister Justin Trudeau unveiled his new cabinet as he started a second term in power after losing parliamentary majority. In total, he named 36 cabinet ministers, half of them women.

A strike at Canadian National Railway put pressure on Mr Trudeau to take action amid curtailing shipments from one the world's biggest exporters of raw materials.

Bank of Canada governor Stephen Poloz, speaking during an onstage interview in Toronto, said the economy is doing well overall, driven by housing and services, while inflation is on target. He said Canadian monetary policy right now remains stimulative, tempering market expectations for a reduction in borrowing costs at the central bank's Dec 4 rate decision.

All eyes will now be on third-quarter gross domestic product data due Nov 29. A day earlier, current-account figures will be released. BLOOMBERG