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TSX Ends Sharply Lower On Commodities, U.S. Fed. Reserve - Canadian Commentary

4/3/2012 4:31 PM ET

Canadian stocks snapped a two-day winning streak to closed at a 4-week low Tuesday, amid sell-offs in financial and commodities stocks. Commodities reacted sharply to the Fed Reserve's policy outlook meeting minutes, which had little in way of quantitative easing, with indications that members discussed little or nothing on further stimulus.

A divided Federal Reserve debated the outlook for the United States economy, but refrained from much discussion on a third round of quantitative easing, according the minutes of the central bank's most recent policy making meeting. The Fed held interest rates at effectively zero and reiterated their conditional pledge to keep rates low through late 2014.

Most members saw the U.S. economy expanding moderately despite the "temporary" effects of higher gasoline prices. The Fed expects energy prices to level out in the second half of this year, resulting in subdued inflation in 2012 and 2013.

Toronto's main index, the S&P/TSX, closed Tuesday at 12,323.61, down 183.45 points or 1.47 percent. The S&P/TSX Composite Index touched an intraday high of 12,498.71 and a low of 12,284.61.

The TSX Venture Index closed at 1,544.27, down 25.52 points or 1.63 percent. The index opened at 1,567.27 compared to its previous close of 1,569.79.

Almost all major components of the S&P/TSX Index were in in the red, led by resource and financial stocks. The lone exception to the declines was the Health Care Index that moved up 1.04 percent.

The Diversified Metals & Mining Index plunged 2.56 percent with Teck Resources (TCK.B.TO) down 2.10 percent and Lundin Mining Corp. (LUN.TO) down 0.45 percent. Eastern Platinum Limited (ELR.TO) plunged 6.76 percent, while First Quantum Minerals (FM.TO) dropped 1.14 percent.

Financial stocks were under selling pressure after the Commodity Futures Trading Commission filed a civil lawsuit against Royal Bank, accusing the company of illegal trade in futures.

The Financial Index dropped 1.30 percent with Manulife Financial Corp. (MFC.TO) shedding 2.26 percent and Sun Life Financial Inc. (SLF.TO) losing 1.70 percent. Bank of Nova Scotia (BNS.TO) dropped 1.25 percent, while TD Bank (TD.TO) shed 0.86 percent.

Royal Bank of Canada (RY.TO) shed 2.79 percent following the lawsuit by CFTC. Separately, the bank said it would acquire the remaining 50 percent stake in the joint venture RBC Dexia Investor Services Ltd. from Banque Internationale à Luxembourg S. A. for C$1.1 billion, in cash.

Smartphone maker Research In Motion (RIM.TO) plunged 9.33 percent, while transportation systems maker Bombardier (BBD.B.TO) gained 0.24 percent.

The Materials Index plummeted 3.08 percent, with Potash Corporation of Saskatchewan Inc. (POT.TO) dropping 1.16 percent and Gabriel Resources Ltd. (GBU) diving 9.07 percent. IC Potash Corp. (ICP.TO) plunged 9.62 percent and Uranium One Inc. (UUU.TO) shed 1.45 percent.

Ivanhoe Mines (IVN.TO) dived nearly 8 percent. Yesterday, the company said it would sell its stake in Mongolian coal miner SouthGobi Resources Ltd. (SGQ.TO) to Aluminum Corporation of China Ltd., for about C$900 million.

Light Sweet Crude Oil futures for May delivery, dropped $1.22 or 1.2 percent to close at $104.01 a barrel on the NYMEX Tuesday.

The Energy Index shed 1.62 percent with Aurora Oil & Gas Limited (AEF.TO) dropping over 4 percent, Suncor Energy Inc. shedding 1.30 percent, and Imperial Oil Limited (IMO.TO) losing 1.93 percent. Talisman Energy Inc. (TLM.TO) was up 1.32 percent

Senior independent energy company Canadian Natural Resources (CNQ.TO) slipped 1.75 percent following the resignation of Allan Markin, effective April 2, 2012, as a Director and as Chairman of the Board. The company named Murray Edwards, currently Vice Chairman, as Chairman of the Board of Directors effective April 2, 2012.

Meanwhile, oil and gas company Bonterra Energy (BNE.TO) shed 2.80 percent. The company announced that Randy Jarock will retire from his positions of President and Chief Operating Officer of the company effective June 30, 2012.

Gold for June delivery, the most actively traded contract, dropped $7.70 or 0.5 percent to close at $1,672.00 an ounce Tuesday on the NYMEX. The Gold Index plunged 3.61 percent.

Among gold stocks, Lake Shore Gold Corp. (LSG.TO) plunged 13.79 percent, Kinross Gold Corp. (K.TO) was down 3.43 percent, and Goldcorp. (G.TO) shed 5.72 percent. Barrick Gold Corp. (ABX.TO) dropped 2.92 percent, while B2Gold Corp. (BTO.TO) dived over 7 percent.

Food and beverages company Molson Coors Brewing Co. (TPX.A.TO) traded at $45.24 after indicating that it would acquire StarBev for 2.65 billion euros, or $3.54 billion.

Lorus Therapeutics (LOR.TO) dived 8 percent, after the biopharmaceutical company announced new preclinical data from its anticancer drug, LOR-253 study.

In other economic news from the U.S., the Commerce Department figures put the February estimate of new manufacturing orders at $468.4 billion, a 1.3 percent increase from January levels. And while most economists had predicted a rebound following the 1.1 percent decline in January - initially reported as a 1 percent decline - many had hoped for a slightly more robust 1.5 percent increase.

Elsewhere, euro zone producer price inflation eased to 3.6 percent year-on-year in February from a revised 3.8 percent in January, Eurostat said. The inflation rate, nonetheless, stayed above the consensus forecast of 3.5 percent. On a monthly basis, the industrial producer price index climbed 0.6 percent, following a 0.8 percent gain in January. Economists were expecting an increase of 0.5 percent.

by RTT Staff Writer

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