CN: TSX moves lower as fresh round of eurozone worries pressure commodities
TORONTO - The Toronto stock market was negative Thursday as worries about Europe's banks discouraged buying and pushed commodities lower.
The S&P/TSX composite index lost 75.35 points to 12,151.12 while the TSX Venture Exchange slipped 3.89 points to 1,512.01.
A flight to the safe-haven status of the U.S. dollar pushed the Canadian dollar down 0.4 of a cent to 98.38 cents US.
U.S. markets were lower as sentiment failed to find lift from positive employment news a day before the release of the U.S. non-farm payrolls report.
Payroll firm ADP said the American private sector created 325,000 jobs during December, compared to economist predictions of 140,000 jobs.
The Dow Jones industrial average fell 101.19 points to 12,317.23, the Nasdaq composite index dropped 10.68 points to 2,637.68 and the S&P 500 index declined 10.18 points to 1,267.12.
While the report is another indication of an improving U.S. labour market, economists observed that the track record of the ADP reports has been uneven.
"It’s important to keep in mind that this report is notorious for missing the actual payroll number by wide margins on a month-to-month basis," noted BMO Capital Markets senior economist Robert Kavcic.
"The biggest miss on record was (an overestimation of) 210,000 in November 2008, with four misses of 100-thousand-plus since then."
European worries were front and centre amid concerns that banks will struggle to raise much-needed new capital.
Trading in UniCredit SpA, Italy’s largest bank, was suspended for the second day running Thursday after shares tumbled further in the wake of a heavily-discounted share offering. UniCredit is trying to raise €7.5 billion to meet new European requirements for banks to shore up capital reserves.
In Spain, the new conservative government said it expects the country’s banks to come up with additional provisions of up to €50 billion, which amounts to four per cent of Spain’s Gross Domestic Product, in extra provisions on bad property assets.
There were also concerns that the debt crisis is testing confidence in even the region’s biggest economies.
France’s borrowing rates rose slightly in a bond auction on Thursday as investor demand eased.
The majority of bonds sold Thursday were 10-years, which markets eye as a benchmark of investor confidence. Demand for them surpassed the supply but was considerably less than at an auction in December. The yield or interest rate on the 10-years was 3.29 per cent, up from 3.18 per cent last time. In total, €4.02 billion were sold.
European government bond auctions used to be routine affairs.
But investors have been demanding higher yields as markets grow increasingly impatient at the failure of eurozone leaders to come up with a convincing fix for the debt crisis.
Countries that cannot raise money at reasonable rates at such sales must be rescued with bailout packages, and investors have grown concerned in recent months that even countries in the so-called European "core" could join that club.
The financials sector was the biggest TSX weight with TD Bank (TSX:TD) 73 cents lower at $75.87 and Royal Bank (TSX:RY) fell 57 cents to $52.38.
The latest flight from risk sent oil and metal prices lower.
The February crude contract on the New York Mercantile Exchange declined 50 cents to US$102.72, pushing the energy sector down 0.45 per cent. Canadian Natural Resources (TSX:CNQ) moved down 50 cents to $39.35.
The base metals sector was the biggest advancer even as the March copper contract on the Nymex dipped three cents to US$3.41 a pound. Teck Resources (TSX:TCK.B) shed 46 cents to $38.33.
But shares in Vancouver miner First Quantum Minerals Ltd. (TSX:FM) jumped $1.54 to $22.60 after it announced that it is selling its mines in Congo and settling legal claims for US$1.25 billion after its operations were nationalized by the government of the central African country. The company said Thursday it had struck a deal with sell its mines and assets to Eurasian Natural Resources Corp. PLC, including the Kolwezi tailings project, and the Frontier and Lonshi mines and related exploration interests.
The gold sector was down almost one per cent as bullion also stepped back with the February contract in New York down $11.40 to US$1,601.30 an ounce. Kinross Gold Corp. (TSX:K) faded 12 cents to $12.26.
European markets were firmly in the red with London's FTSE 100 index down 0.42 per cent, Frankfurt's DAX slipped 0.1 per cent and the Paris CAC 40 lost 1.09 per cent.
Earlier in Asia, Japan’s Nikkei 225 index fell 0.8 per cent, South Korea’s Kospi index lost 0.1 per cent while Australia’s S&P ASX 200 gave up 1.1 per cent.
Hong Kong’s Hang Seng Index rose 0.5 per cent.
Mainland China’s benchmark Shanghai Composite Index lost one per cent to 2,148.45, its lowest level in almost three years. The Shenzhen Composite Index lost 3.5 per cent as more than 100 companies plunged to the daily limit of 10 per cent.
In other corporate news, Magna International Inc. (TSX:MG) has acquired Vogelsitze GmbH, a German manufacturer of seats for the bus and light train industries for an undisclosed price. Magna shares dipped five cents to $34.15.
Australia-listed PanTerra Gold Ltd. has made an all-stock takeover offer for Vancouver-based Novus Gold Corp. (TSXV:NOV), which has two highly prospective copper and gold concessions in the Dominican Republic. Its shares haven't traded since Tuesday when they closed at five cents.
