TSX moves lower as ECB president gives gloomy outlook - UPDATEReported by Proactive Investors on Thursday, 5 July 2012 (on July 5, 2012)
*main Canadian and US market numbers have been updated
*Tim Hortons latest news added
*Toronto's property sales numbers added
Toronto's main market fell lower Thursday afternoon, as traders worried about the American and European economies amid comments made by European Central Bank president Mario Draghi after the bank cut its benchmark interest rate by a quarter point to 0.75 per cent.
Markets fell despite some better-than-expected US jobs reports, a rate cut by the ECB and China's central bank, and further monetary stimulus by the Bank of England, which said it would restart its printing presses and make 50 billion pounds of asset purchases with newly created money to help the economy out of recession.
Investors were soured by comments from Draghi, who said that inflation will fall below two per cent in 2013, and that he saw "now a weakening basically of growth in the whole of the euro area."
Elsewhere in the eurozone, Spain sold 3 billion euros in bonds Thursday morning, the first auction since last week's eurozone summit. Yields moved up to 6.54%, but stayed below peak levels hit in June.
The Chinese bank also announced it is cutting its benchmark lending rate by 0.31 of a point to six per cent Thursday, the second time in a month the bank has cut interest rates in an attempt to stimulate China’s slowing economy. Analysts worried that the move could be a signal that the Chinese data dump next week could show worse numbers than expected.
Weak US services sector data also did not help matters.
Back in Toronto, as of 2:15 pm EDT, the S&P/TSX Composite Index lost 50.72 points or 0.43% to 11,863.15 while the junior Venture lost 19.23 points or 1.55% to 1,222.67.
Commodities took the brunt of investors’ worries as losses in the materials sector and declines in metals and mining stocks pressured the market. Canada's markets are heavily weighted toward commodities, which rely heavily on demand from China.
Gold for August delivery fell $13.90 to $1,607.90 an ounce, while silver futures retreated 58 cents to $27.70 an ounce.
Crude oil for August delivery fell 10 cents to $87.56 a barrel, and the base metal copper contract lost five cents, to $3.49 a pound.
Materials, metals and mining, energy and financials all dipped into the red Thursday afternoon in Toronto.
Most gold miners struggled, with Kinross Gold (TSE:K) down sharply by 2.25%, while Goldcorp (TSE:G) lost 1.46% and Barrick Gold (TSE:ABX) fell 1%.
Lake Shore Gold (TSE:LSG) posted a gain of over 6%, a day after the company announced strong second quarter production of 24,426 ounces of gold. Elsewhere in mining, Ivanhoe Mines (TSE:IVN.RT) dipped over 5%.
Copper heavyweight Teck Resources (TSE:TCK.B), meanwhile, was up 1.15%.
In energy, Suncor Energy (TSE:SU) lost 1.61%, while elsewhere in the sector, Bankers Petroleum (TSE:BNK) gained 11.54% as the company released an operational update.
Financials were also lower Thursday, as Manulife Financial (TSE:MFC) lost 1.22% and Canada's biggest bank, Royal Bank of Canada (TSE:RY), edged down 0.17%.
In corporate news, after a year-long wait for approval from the Ontario Securities Commission (OSC) and the federal Competition Bureau, the Maple Group on Wednesday received the go ahead from these authorities to take over the stock exchange operator TMX Group (TSE:x) – only to reportedly hit a hurdle in B.C.
The news rolled out Thursday that even after weeks of discussions, the British Columbia Securities Commission (BCSC) has a list of demands that has resulted in an impasse between the two parties.
Coffee-and-doughnut chain Tim Hortons (TSE:THI) announced Thursday that it is working to roll out free wireless Internet to more than 2,000 locations across the country.
Ontario-based miner Kirkland Lake Gold (TSE:KGI) said fiscal fourth-quarter profit more than doubled on Thursday thanks to higher production and lower costs.
For the quarter that ended April 30, net earnings before taxes rose to $9 million, or 13 cents per share. That compares to the $4.1 million, or six cents per share, a year-earlier.
Planes and trains maker Bombardier (TSE:BBD.B) announced Thursday that it has signed a 10-year technology licence agreement with CSR Puzhen to manufacture and sell trams in China.
On the economic front, property sales in Canada’s largest city dropped 13% last month, the Toronto Real Estate Board reported Thursday, a day after Vancouver reported a 27.6% plunge.
Sales in the city of Toronto were down 13% from a year ago with 9,422 transactions in June. For the entire Greater Toronto Area sales were off 5.4% from a year earlier.
Traders also looked ahead to the release of Canadian jobs data Friday. It is expected the economy created about 16,000 jobs last month.
After a day off for Independence Day, US markets were choppy Thursday afternoon as investors’ response to two better-than-expected US employment reports was muted by weak ISM data, and Draghi's warning for a regional downturn.
ADP data showed private-sector employment rose more than expected in June, adding 176,000 jobs during the month. Separate data also showed the number of Americans filing new claims for unemployment benefits last week fell by the most in two months.
The Dow Jones Industrial Average lately ventured into positive territory by 4.69 points to 12,947.98, while the S&P 500 slipped 1.56 points to 1,372.46, while the Nasdaq edged up by 9.34 points to 2,985.42.
Draghi’s comments worried traders further as he reflected on credit flows that are expected to remain weak and slowing economic growth, saying "the risks surrounding the economic outlook for the euro area continue to be on the downside."
Trader confidence was not helped by news that U.S. services activity slowed in June to the weakest level since January 2010, according to data released by the Institute for Supply Management (ISM) on Thursday.
The ISM services index fell to 52.1% from 53.7% in May, which was worse than the 52.9% than economists expected.
In corporate news, chip maker Ramtron International Corp (NASDAQ:RMTR) said Thursday that its board has unanimously concluded that rival Cypress Semiconductor Corp's (NASDAQ:CY) offer to buy the company for $2.68 per share is "inadequate", and therefore rejected the latest bid.
AutoNation (NYSE:AN), a U.S.-based automotive retailer, said Thursday new vehicle sales spiked 38 per cent in June, boosted by strong import sales.
International Speedway Corp.’s (NASDAQ:ISCA) fiscal second-quarter profit smashed analyst estimates amid higher revenue, and also reiterated full-year earnings forecast.
Walgreen Co. (NYSE:WAG) said Thursday it is acquiring a regional U.S. drugstore chain for $438 million that will give it a larger presence in the mid-Southern United States.
U.K. bank Barclays (NYSE:BCS) (LON:BARC) saw its credit rating cut by two major credit rating agencies Thursday, in the wake of a trading scandal that has seen three senior officials, including CEO Bob Diamond, resign.
Both Moody's and Standard & Poor's maintained their ratings on the bank but lowered their outlooks to "negative" from "stable", which means that a downgrade of the actual rating is now more likely.
Apple (NASDAQ:AAPL) has suffered a court defeat in a case involving Taiwan’s HTC, with a London court ruling that HTC’s devices do not infringe Apple patents.
Best Buy Co. (NYSE:BBY) is set to begin a trial of a new store format that replicates Apple's store concept.
Meanwhile, June sales for retailers released Thursday were largely disappointing as consumer confidence ebbs, with few beating estimates for the month, and names like The Wet Seal (NASDAQ:WTSLA) dragging down numbers.
Target (NYSE:TGT), Costco (NASDAQ:COST), Macy's (NYSE:M) and the Gap (NYSE:GPS) also fell short. Those that topped analyst views in June were few and far between, including Stage Stores (NYSE:SSI), TJX Companies (NYSE:TJX), and Limited Brands (NYSE:LTD), the parent of Victoria's Secret and Bath & Body Works.
All eyes on Friday will be on the jobs report from the Labor Department; economists polled by MarketWatch expect nonfarm payrolls to increase by 100,000 in June compared with 69,000 in May.
European markets finished mixed as of the most recent closing prices. The FTSE 100 gained 0.14%, while the CAC 40 led the DAX lower. They fell 1.11% and 0.45%, respectively.
Links: Full news story
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