AFP: Stocks fall, dollar down after BoC lowers rates
TORONTO — Stock markets were lower Tuesday morning as investors stepped back following strong advances Monday while the Bank of Canada cut its key interest rate by a quarter-point, saying "the global economy appears to be heading into a mild recession, led by a U.S. economy already in recession."
The Toronto S&P/TSX composite index declined 176.8 points to 10,074.6, after soaring almost 700 points Monday.
The central bank's sobering statement said that "the weaker outlook for global demand will increase the drag on the Canadian economy coming from exports."
Lower commodity prices will also dampen the outlook, the bank said, and tight credit conditions will restrain business and housing investment.
The Canadian dollar was down 1.05 cents to 82.72 cents US in the wake of the cut in the bank's overnight rate to 2.25 per cent. The reduction comes after the Bank of Canada joined other central banks in cutting rates by a half-point Oct. 8.
Many market participants had hoped for another half-point ease, and stocks were also lower in the wake of a mixed bag of earnings reports.
In Toronto, Sun Life Financial Inc. (TSX:SLF) shares were down $1.93 to $31.79 after a $396-million third-quarter loss, "significantly impacted by a deterioration in global capital markets."
The TSX Venture Exchange dipped 4.77 points to 980.17.
New York's Dow Jones industrials slipped 20.71 points to 9,244.72 following a 413-point surge Monday.
The S&P 500 was down 3.61 points to 981.79, and the tech-heavy Nasdaq composite index was down 4.84 points to 1,765.19 after Texas Instruments Inc. warned that orders are slowing rapidly and it will cut jobs. Shares in the maker of chips for cellphones and other gadgets lost $1.42 to $16.56.
Caterpillar Inc.'s third-quarter profit missed analyst expectations, slipping six per cent as the world's largest maker of construction and mining equipment said higher raw material costs offset record global sales. The company, which noted "recessionary conditions" in North America, forecast flat sales for 2009 and its shares stepped back 80 cents to US$40.10.
Chemical manufacturer DuPont Co. declined $1.27 to US$34.90 after its third-quarter earnings fell 30 per cent and it trimmed its earnings outlook.
Drug developer Schering-Plough Corp. said its third-quarter profit dropped 23 per cent on higher expenses and charges, but still topped analyst forecasts. Its shares gained 28 cents to US$14.78.
The Toronto energy sector eased, after jumping 14 per cent in the previous session, as crude oil prices retraced Monday's bounce ahead of Friday's meeting of the Organization of Petroleum Exporting Countries.
The Toronto oil and gas group was down two per cent as the near-month crude oil contract declined $2.75 to US$71.50 a barrel on the New York Mercantile Exchange.
EnCana Corp. (TSX:ECA) was down $1.07 to $56 while Petro-Canada (TSX:PCA) shed $1.04 to $29.96.
The financial sector was off one per cent as TD Bank (TSX:TD) gained $1.17 to $59.65 but CIBC (TSX:CM) dipped 74 cents to $60.20.
The December bullion contract in New York was down $16.30 to US$773.70 an ounce, taking the TSX gold sector down 4.6 per cent. Barrick Gold Corp. (TSX:ABX) faded $1.81 to $30.52.
The base metals sector retreated 2.8 per cent with Teck Cominco Ltd. (TSX:TCK.B) down 63 cents to $18.12.
FNX Mining Co. Inc. (TSX:FNX) has suspended commercial nickel production at its Levack mine near Sudbury, Ont., citing low prices and high costs. Its shares tumbled 60 cents to $6.20.
Nemi Northern Energy & Mining Inc. (TSX:NNE.A), a Vancouver-based coal developer, has agreed to merge with Australia's Aviva Corp. Nemi stock was stoked up 18.5 cents or 75 per cent to 43 cents.
Investors were relieved to see further easing on credit markets, as lending rates between banks in the U.S. and Europe dropped to the lowest levels in over a month.
The rate on three-month loans in US dollars declined 0.23 percentage point to 3.83 per cent.
And in another effort to unclog credit markets, the U.S. Federal Reserve said it will start buying commercial paper -- a crucial short-term funding mechanism -- from money market mutual funds.
Money market funds have been under pressure as skittish investors demand withdrawals.
The good feeling from Monday carried through today in Tokyo, where the Nikkei average gained 3.3 per cent, rising 300.66 points to 9,306.25.
But Hong Kong's Hang Seng lost 1.8 per cent and the Shanghai composite declined 0.8 per cent amid signs of a slowing Chinese economy.
The FTSE 100 index was off 50.67 points or 1.2 per cent to 4,232 in London, while the Paris CAC-40 was ahead 0.65 per cent on news of more bank bailout news, and the German DAX edged 1.3 per cent lower.
