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TSX Ends Sharply Lower On Europe - Canadian Commentary

Canadian stocks closed deep in the red Monday, amid widespread sell-offs after reports showed manufacturing contracted in the eurozone and China. The recent political developments in France and Netherlands also rekindled concerns over the eurozone sovereign debt crisis escalating in the region.

The Dutch Prime Minister and his cabinet resigned Monday, after talks with other parties failed to find an agreement on austerity measures to spruce up the Netherlands deficit budget with drastic spending cuts. It was a definite embarrassment the Dutch, as they had vociferously advised other crisis-ridden nations on the need for strict austerity measures, but find themselves at loggerheads over the same issue.

In France, presidential elections have roiled the political scenario with Socialist Francois Hollande taking a significant lead into the second round of elections slated for May 6. Nicolas Sarkozy, an ardent supporter of austerity measures to counter the eurozone crisis, is struggling to hold on to the presidency after finishing second to Hollande.

Toronto's main index, the S&P/TSX, closed Monday at 11,989.10, down 158.18 points or 1.30 percent. The S&P/TSX Composite Index touched an intraday high of 12,136.28 and a low of 11,919.13.

The TSX Venture Index closed at 1,371.03, down 26.92 points or 1.93 percent. The index opened at 1,378.83 compared to its previous close of 1,397.95.

All components of the S&P/TSX Index were in the red, with the Diversified Metals & Mining Index plunging 4.23 percent and the Materials Index down nearly 3 percent.

The Metals & Mining Index decline was driven by First Quantum Minerals Ltd. (FM.TO) down 5.26 percent, while Lundin Mining Corp. (LUN.TO) dropped 6.20 percent. Cline Mining Corporation (CMK.TO) slipped 10.10 percent. Teck Resources (TCK_B.TO) shed 3.68 percent.

Baja Mining Corp. (BAJ.TO) plunged over 37 percent after announcing cost increase of approximately $246 million, a 21.5% increase over the 2010 funding requirement, after exhausting existing contingency and cost overrun facilities.

The Materials Index plunged with Potash Corporation of Saskatchewan Inc. (POT.TO) dropping 2.71 percent, while Uranium One Inc. (UUU.TO) shed 2.04 percent. Cameco Corporation (CCO.TO) lost 3.23 percent.

Gold for June delivery dropped $10.20 or 0.6 percent to close at $1,632.60 an ounce Monday on the NYMEX. The Global Gold Index dropped 2.60 percent.

Among gold stocks, Eldorado Gold Corp. (ELD.TO) shed over 6 percent, while Goldcorp Inc. (G.TO) dropped 3.39 percent. Kinross Gold Corp. (K.TO) dropped 2.22 percent, while Barrick Gold Corp. (ABX.TO) shed 1.68 percent.

Light Sweet Crude Oil futures for May delivery, dropped $0.77 or 0.7 percent to close at $103.11 a barrel on the NYMEX Monday.

The Energy Index dropped 0.89 percent with Lundin Petroleum AB (LUP.TO) losing over 6 percent. Suncor Energy Inc. gained 0.10 percent, while Canadian Natural Resources Limited (CNQ.TO) shed 1.59 percent. Cenovus Energy Inc. (CVE.TO) dropped 1.24 percent.

The Financial Index shed nearly 1 percent, led by the Royal Bank of Canada (RY.TO) down 1.14 percent, while Bank of Nova Scotia (BNS.TO) was down 0.86 percent. The Toronto-Dominion Bank (TD.TO) lost 1.35 percent.

Smartphone maker Research In Motion (RIM.TO) was down 2.11 percent, while transportation systems maker Bombardier (BBD.B.TO) shed 1.70 percent.

Global drilling services company Foraco International SA (FAR.TO) lost 0.81 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 1.57 percent after announcing the divestiture of its Healthcare business to an affiliate of Veritas Capital for $1.25 billion cash.

Telecommunications company Otelco Inc. (OTT_UN.TO) dived over 44 percent after announcing an 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.

From China, HSBC said 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, with a reading below 50 indicative of a drop in industrial production.

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.

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

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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