TH: TSX little changed amid slower economic growth
The Toronto stock market was little changed in early trading Tuesday as investors took in data showing slower Canadian economic growth and an earnings report from Scotiabank which missed analyst expectations.
The S&P/TSX composite index moved 11.1 points higher to 11,906.7 and the TSX Venture Exchange was up 4.17 points to 1,501.34.
Scotiabank (TSX:BNS) said Tuesday that its third-quarter profit rose 14 per cent from a year ago to $1.06 billion. Cash earnings per share came in at 99 cents a share, one cent per share less than analysts expected and its shares dipped 11 cents to $51.79.
The Canadian dollar was down 0.4 of a cent to 93.9 cents US as Statistics Canada reported that the Canadian economy continued to grow in the second quarter but at a much reduced pace from the January-March period. The agency said Tuesday that the economy grew at an annualized rate of two per cent after expanding by 5.8 per cent in the first quarter.
Economists had expected expansion in the neighbourhood of 2.5 per cent “however, the breakdown of the quarter produced no major nasty surprises, as slower government spending and housing were major factors behind the cool-down,” observed BMO Capital Markets deputy chief economist Doug Porter.
The TSX felt pressure from the resource sector as oil and metal prices backed off.
The base metals sector led decliners, down 0.5 per cent as September copper on the Nymex was off three cents to US$3.38 a pound. HudBay Minerals (TSX:HBM) lost 20 cents to C$14.95.
Energy stocks were weak as the September crude contract on the New York Mercantile Exchange fell 33 cents to US$74.37 a barrel, extending a month-long slump on demand worries. Suncor Energy (TSX:SU) declined 30 cents to C$32.62.
However gold prices headed up with the December bullion contract in New York ahead $8.70 to US$1,247.90 an ounce. The gold sector was the strongest advancer, up about one per cent and Goldcorp Inc. (TSX:G) rose $1.49 to C$47.90.
The telecom sector was slightly higher after the CRTC ruled that the big phone and cable companies that own the nation’s Internet infrastructure must offer their highest speeds when they sell wholesale access to smaller competitors.
It said Monday that traditional telephone companies such as Bell will be permitted to charge an additional 10 per cent markup on the costs of providing access to their highest speeds. But it said that cable companies, such as Rogers or Videotron, are already charging a sufficient markup for their service. BCE (TSX:BCE) was off three cents to $33.12 while Rogers Communications (TSX:RCI.B) was unchanged at $37.52.
Investors also looked ahead of a series of key U.S. economic reports, including data on regional manufacturing activity in the Midwest, consumer confidence and home prices.
There has been growing concern throughout the month that the economic recovery is slowing to the point where the country could fall back into recession and data out on Tuesday’s isn’t likely to change that perception.
The Chicago Purchasing Managers Index likely fell in August to 57 from 62.3 last month. The drop in the index would follow other regional manufacturing indexes that showed activity in the sector slowing in other parts of the country throughout the month.
American consumers also remain uncertain about the economy, which has kept consumer confidence readings low. The latest reading on confidence is expected to show little change in August, according to economists polled by Thomson Reuters. The consumer confidence index likely inched up to 50.5 from 50.4 last month.
Meanwhile, a housing report showed U.S. home prices rose in June for the third straight month. Sales in June, though, were still getting a lift from a now expired tax credit. That has tempered some of the excitement over the report and other indicators point to further weakening in the housing market.
New York’s Dow Jones industrial average lost 50.9 points to 9,958.8.
The Nasdaq composite index declined 13.17 points to 2,106.8 while the S&P 500 index was down 5.9 points to 1,043.
The week’s U.S. economic reports also include the monthly manufacturing and services surveys from the Institute of Supply Management on Wednesday and the government’s employment report for August on Friday.
They will likely go a long way toward determining whether the U.S. Federal Reserve enacts further stimulus measures. Last week, Fed chairman Ben Bernanke said another round of monetary easing may be in the offing if the U.S. economy continues to weaken.
“This is a heavy week for U.S. economic data so markets are likely to be even more nervous,” said Phil Gillett, a trader at Spreadex.
All eyes later in the session will be on the minutes to the last rate-setting meeting of the Fed and how split the rate-setting panel is about the prospect of further monetary easing.
Asian markets also fell back as investors fretted about the pace of the global economic recovery.
The pessimism was most pronounced in Japan, where the Nikkei 225 stock index tumbled 3.6 per cent. As well as worrying about the slowdown in the U.S., Japanese investors are clearly concerned that the continued rise in the value of the yen and falling prices will push the world’s third-largest economy back into recession.
Hong Kong’s Hang Seng index retreated one per cent and Australia’s S&P/ASX 200 fell 1.1 per cent.
London’s FTSE 100 index lost 0.84 per cent, Frankfurt’s DAX gave back 0.78 per cent while the Paris CAC 40 shed 0.82 per cent.
