Toronto Stocks Open Higher As Bank Earnings Trump Poor GDP

--Strong earnings from CIBC spur financial sector higher
--Market also cheered by CIBC's dividend hike
--Poor GDP data an offset, but factors dragging down the economy in second quarter seen as temporary

By  Monica Gutschi
OF DOW JONES NEWSWIRES

 TORONTO  (Dow Jones)--Strong earnings and a welcome dividend hike by  Canadian Imperial Bank of Commerce  (CM) powered  Toronto's  stock market higher early Wednesday, despite poor economic data and a drop in the price of gold.
"Their numbers were a big surprise," portfolio manager  John Kinsey  of  Caldwell Securities  said of CIBC's consensus-beating third-quarter performance. "That kind of kick-started the financial sector and that's a big sector."

Indeed, CIBC shares were up  C$2.51 to C$75.57  in early trading, helping propel the  Toronto Stock Exchange's  financial-services index 1% higher. It was the biggest gainer among the TSX's 10 industry sectors.

At  9:45 a.m. EDT  ( 1345 GMT ), the  S&P /TSX Composite Index was up 65.94 points, or 0.52%, at 12700.65. Advancers led decliners 558 to 322. The  S&P /TSX 60 Index was up 3.26 points, or 0.5%, to 723.33 points.

Kinsey said investors were also cheered by CIBC's move to increase its quarterly dividend to  90 Canadian cents  from  87 Canadian cents , the first increase since  August 2007 . The bank's third-quarter earnings rose 26%, primarily on investment-banking fees.

That news appeared to easily trump a surprise drop in second-quarter gross domestic product. The economy shrank unexpectedly for the first time in two years, becoming only the second  G-7  economy to see output decline in the period.

Statistics  Canada  reported that GDP fell 0.1% from the first quarter, for an annualized drop of 0.4%, well below forecasts of a flat quarter.

But economists said the bulk of the decline was due to a 2.1% drop in exports, mainly as energy shipments fell on maintenance shutdowns and wildfires in northern  Alberta . They also pointed to June's numbers, which showed the economy increased more than expected in that month, setting the stage for a better third quarter.

"Yes, the headline is not good but temporary factors dragging activity lower such as  Japan's  supply disruptions and wildfires in  Northern Alberta  are, well, temporary. Look for a better Q3," a research note from  Bank of Montreal  suggested.

The bullishness over CIBC's earnings also helped offset the downdraft from a pullback in gold prices, which was dragging the materials index 0.4% lower early Wednesday.