The Toronto stock market was lower early Wednesday as commodity prices backed off and markets digested solid gains from the previous session.
The S&P/TSX composite index was down 21.3 points to 11,886.2 while the TSX Venture Exchange declined 1.49 points to 1,460.02.
Auto parts company Magna International (TSX:MG.A) was in focus after the Ontario Securities Commission said Tuesday that it wants to block a plan to eliminate a dual-class share structure at the firm that will see founder and chairman Frank Stronach receive millions in return.
The provincial regulator said shareholders are being asked to approve the plan without sufficient information to form a reasoned judgment — a position that Magna disputes.
The OSC has scheduled a hearing for June 23, during which it will ask a commission panel to strike down the proposed transaction. Magna shares were down $1.64 to $71.72.
The Canadian dollar was down 0.42 of a cent to US$97.13.
The TSX energy sector was down 0.31 per cent while the July crude contract on the New York Mercantile Exchange fell 39 cents to US$76.55 a barrel. Canadian Natural Resources (TSX:CNQ) gave back 20 cents to C$37.82.
The drop in price came as the American Petroleum Institute released data after markets closed Tuesday which revealed a rise in both crude oil stocks and oil product stocks. Further inventory data will be released later in the morning by the U.S. Department of Energy.
The base metals sector led decliners, down 0.67 per cent as the July copper contract on the Nymex eased three cents to US$2.97 a pound. Teck Resources (TSX:TCK.B) declined 43 cents to C$36.07.
The gold sector was slightly higher as the August gold contract in New York was off 80 cents to US$1,233.60 an ounce.
Stock markets had closed higher on Tuesday as hopes for higher demand boosted oil and copper prices while investors also took in data showing improving manufacturing activity in the New York area. The TSX ran up 240 points while the Dow industrials gained 214 points.
New York markets were also lower Wednesday amid weak housing and earnings data.
The Dow Jones industrial average lost 51.4 points to 10,353.4.
The Nasdaq composite index dropped 10.12 points to 2,295.76 while the S&P 500 index fell back 3.8 points to 1,111.45 as U.S. home construction plunged last month to the lowest level since December as builders scaled back without a tax credit from the U.S. federal government to lure buyers. Building permits also fell, a sign the construction industry won’t fuel the economic recovery.
The U.S. Commerce Department said that construction of new homes and apartments fell 10 per cent from a month earlier to a seasonally adjusted annual rate of 593,000. April’s figure was revised downward to 659,000.
Applications for new building permits, a sign of future activity, fell 5.9 per cent to an annual rate of 574,000, the lowest level in a year.
Other data showed that industrial production in the U.S. rose 1.2 per cent during May, much better than the 0.8 per cent gain that analysts had expected.
Earnings from shipping company FedEx raised more questions about the U.S. economic revival. The company said Wednesday that it expects to earn 85 cents to US$1.05 per share for the quarter ending in August. Analysts had been expecting US$1.03 per share.
The package delivery company is seen a barometer of the strength of the overall economy because shipping demand tends to increase as business conditions improve. FedEx shares lost $1.51 to US$81.50.
In other corporate news, Bombardier Transportation (TSX:BBD.B) has won a contract with Swiss Railways to supply new double-deck trains for inter-city travel. The contract for 59 Bombardier Twindexx trains, with options for 100 more, has a total value of around US$1.6 billion. Its shares were seven cents higher to C$4.90.
Nokia Corp., the world’s largest mobile phone maker, says its performance this year will be worse than earlier expected because of tough competition, especially in the smart phone market. Nokia shares fell $1.01 to US$8.81 as it said its second-quarter result will be “at the lower end of, or slightly below, its previously expected range of euro6.7 billion to euro7.2 billion (US$8.2 billion to $8.8 billion).”
BP shares were down $1.36 to US$30.04 in New York ahead of what promises to be a tense meeting between the oil company’s chairman and U.S. President Barack Obama in Washington. Obama has vowed to make BP pay for all of the damage caused by its leaking well in the Gulf of Mexico, and has demanded that the company set up an independently controlled fund to assure that it will pay.
Sceptre Investment Counsel Limited (TSX:SZ) and Fiera Capital Inc. say they have signed a definitive agreement to merge the two companies into a bigger money manager with $30 billion in assets. The share swap deal is worth $72.8 million at Wednesday’s opening stock price for Sceptre on the TSX. Sceptre shares ran ahead 56 cents to C$5.76.
MEMC Electronic Materials Inc. (NYSE:WFR) division SunEdison said Wednesday it has bought solar power development projects in Ontario from TransAlta Corp. (TSX:TA). The purchase includes two ground-mount solar photovoltaic development projects near Sandhurst, about 40 kilometres west of Kingston. TransAlta shares dipped eight cents to $21.47.
Overseas, London’s FTSE 100 index inched up 0.04 per cent, Frankfurt’s DAX stepped back 0.27 per cent while the Paris CAC 40 was off 0.13 per cent.
Spanish shares were down 0.5 per cent after local daily El Economista reported that the International Monetary Fund and European Union are preparing a financial backstop for Spain. Finance ministry officials in Spain denied the report.
Meanwhile, Spain’s borrowing costs have soared to another record amid worries over the government’s finances and financial problems for banks. The interest rate gap, or spread, between 10-year Spanish bonds compared to their benchmark German equivalent rose Wednesday by more than 0.10 percentage point to 2.23 percentage points. A growing gap indicates investors think Spain’s debt is getting riskier.
In Asia, Japan’s Nikkei 225 stock average rose 1.8 per cent, Australia’s ASX/S&P 200 advanced 1.2 per cent and the Kospi in South Korea gained 0.9 per cent. Financial markets in Hong Kong, mainland China and Taiwan were closed for the last day of public holidays.
