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TSX Dips Below 12K-mark On Global Growth Concerns - Canadian Commentary

Canadian stocks were lingering deep in the red Monday morning amid widespread sell-offs after reports showed manufacturing contracted in the euro zone and China. Also, the recent political developments in the euro zone raised concerns over the debt situation in the region.

While Dutch Prime Minister offered his resignation amid a revolt against spending cuts, French President Nicolas Sarkozy lost the first round of his re- election bid.

The S&P/TSX Composite Index lost 174.72 points or 1.44 percent to 11,972.56, near its 2-week low.

The Diversified Materials Index was the major loser, dipping over 4 percent. First Quantum Minerals (FM.TO), Inmet Mining (IMN.TO) and Teck Resources (TCK_B.TO) shed around 4 percent each.

The price of crude oil was lingering below $103 Monday morning amid concern over the euro zone debt crisis. Crude for June was down $1.63 to $102.25 a barrel.

In the oil patch, Lundin Petroleum AB (LUP.TO) lost over 6 percent. MEG Energy (MEG.TO) was down nearly 3 percent.

The price of gold was lingering near its two-week low Monday morning amid a generally steady US dollar. Gold for June shed $10.40 to $1,632.40 an ounce.

Among gold plays, Allied Nevada Gold (ANV.TO) and Detour Gold (DGC.TO) lost around 6 percent each. Goldcorp. (G.TO) and Royal Gold (RGL.TO) were down around 3 percent each.

Global drilling services company Foraco International SA (FAR.TO) lost close to 3 percent after announcing the acquisition of 51 percent of Brazilian mineral drilling services company WFS Sondagem LTDA for approximately $43 million through a combination of cash and Foraco shares.

Thomson Reuters (TRI.TO) surrendered nearly 2 percent after it said that it would divest its Healthcare business to an affiliate of Veritas Capital for $1.25 billion cash.

Telecommunications company Otelco Inc. (OTT_UN.TO) dived over 40 percent after announcing anticipated expiration of customer contract and reduction in quarterly distribution payment to IDS holders.

In economic news, Statistics Canada said wholesale sales rose 1.6 percent in February to C$48.5 billion, followed a 1.1 percent decline in January. Economists predicted wholesale sales would be down 0.17 percent, but a 2.2 percent rise in volumes helped drive a monthly increase.

Earlier today, HSBC said that its preliminary Purchasing Managers Index rose to 49.1 in April from 48.3 in March, indicating a recovery in Chinese growth in the first quarter. However, it still showed a second month of contraction because a reading below 50 indicates a drop in industrial production.

Elsewhere, the euro zone private sector activity declined further to a 5-month low in April, flash estimate published by Markit Economics showed. The composite output index dropped unexpectedly to 47.4 in April from 49.1 in March. Economists were forecasting the reading to rise to 49.3. A reading below 50 suggests contraction in the private sector.

A separate data from Markit Economics revealed that German private sector growth eased in April with activity reaching levels close to stagnation. The composite output index, that measures performance of both manufacturing and services, fell to a five-month low of 50.9 in April from 51.6 in March. A reading above 50 indicates expansion of the sector, while a reading below 50 suggests contraction.

by RTTNews Staff Writer

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