The Canadian Press

Improvements in the economy could support last week’s sharp gains on stock markets as investors grow more confident that job losses in the United States, a major consequence of the recession, are giving way to job creation.

Hopes are also high that a report at the end of the week will show continued employment gains in Canada.

“The things that the market is worried about are dissipating somewhat,” said John Johnston, chief strategist at the Harbour Group at RBC Dominion Securities.

“I don’t want to sound outrageously bullish here at this point, but it looks to me like there’s room for some upside gains and maybe we hit some new highs here for the whole cycle.”

The Toronto stock market ran ahead a solid three per cent last week to its highest level for this year.

The showing came amid relief the U.S. economy lost far fewer jobs than expected during February — 36,000 compared with the 50,000 that were expected.

The U.S. Labour Department also acknowledged that the severe storms that hit the American east coast during February affected the data. And economists believe that could translate into an improving jobs picture for March.

“It could mean a big pop in March,” Johnston said.

The strong showing on the TSX last week leaves the Toronto market well above the 11,746 level where it started the year.

Last week’s advances were also spurred by higher commodity prices, helped along by a well-received report showing the American manufacturing sector continues to expand.

Bank stocks also contributed to the strong showing as TD Bank (TSX:TD) and Bank of Montreal (TSX:BMO) turned in earnings reports that beat expectations.

Scotiabank (TSX:BNS) reports its quarterly financial results on Tuesday, while Canadian employment data for February is coming out on Friday.

“I would just go with the consensus which I believe is a modest gain of 10-20,000 jobs and a stable unemployment rate,” said Patricia Croft, chief economist RBC Global Management, who noted Canada has created jobs in four of the last six months.

“So maybe it’s part of the start of a trend and I expect that that will continue.”

The Canadian employment rate for January was 8.3 per cent while the February U.S. rate came in at 9.7 per cent.

“We’re in a very unusual situation where the Canadian unemployment rate is below the U.S.,” Croft said. “That doesn’t happen very often.”

Investors are also feeling a little better about the debt crisis in Greece after the Greek parliament approved new spending cuts and taxes.

The austerity package aims to save euro4.8 billion (C$6.7 billion) with measures including higher consumer taxes and cuts to public sector workers’ pay of up to eight per cent.

The cuts are key in convincing bond markets to loan the country money and to win support from the European Union.

Worries about sovereign debt have been one reason that gains on the TSX stalled recently. Investors have also been worried about the Chinese government curbing lending and what will happen later in the year when massive stimulus measures around the world start to come to an end.

On the plus side, “for the most part, earnings were a pleasant surprise, companies beating expectations, revenue beginning to improve, balance sheets in good shape,” added Croft.

“It’s a question of how long can it be sustained.”