4 Min Read
TORONTO (Reuters) - Toronto's main stock index ended sharply lower on Wednesday as gold miners fell as bullion lost its safe-haven luster after Tuesday's U.S. Federal Reserve statement and recent U.S. data that has signaled economic recovery.
Pat McHugh, Canadian equity strategist at Manulife Asset Management, said appetite for gold has been diminished by the stronger economic outlook and on an easing of concerns about the euro zone's debt problems.
The steep slide in gold prices also reflects the market perception that the Fed is now unlikely to ease credit any further, with bullion prices giving up almost all of the gains they had made after January 25, when the U.S. central bank signaled that it could provide additional policy stimulus.
The Fed gave no hint on Tuesday of providing more economic stimulus.<GOL/>
"People are feeling less scared about the economy. They're selling gold," McHugh said.
"If the Fed was going to give us hints about more monetary easing they would be doing that because they had concerns about the economy."
U.S. Treasury yields also soared on Wednesday as investors turned away from safe-haven government debt. <US/>
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended the day down 159.79 points, or 1.27 percent, at 12,377.90, with nine of its 10 key sectors lower. The index's materials group, which includes gold miners, skidded 3.3 percent and led the index lower.
Technical charts this week have shown that the index had undergone a "golden cross" in which its 50- and 200-day moving average signaled a positive trend, but that remains to be seen.
Among big resource shares, miner Barrick Gold (ABX.TO) dropped 4.5 percent to C$42.88, and oil company Suncor Energy (SU.TO) fell 3.8 percent to C$32.75. Goldcorp (G.TO) sank 3.1 percent to C$44.09, and fellow miner Kinross Gold (K.TO) dropped 5.8 percent to C$9.8.
The Toronto market diverged from stock markets around the world, which fared better on Wednesday on the sunnier economic outlook and as most U.S. banks passed their annual stress tests in a report that underscored the recovery of the financial sector but called out a few laggards, including Citigroup Inc.
That positive tone spilled over into the Canadian financial sector, which climbed 0.6 percent. Canadian life insurance stocks jumped, led by sector heavyweight Manulife Financial (MFC.TO), as the more optimistic outlook from the U.S. central bank boosted bond yields, which suggested less pressure on the companies' profits in the future.
Manulife rose 6.6 percent to C$13.49 and Sun Life Financial (SLF.TO) soared 4.5 percent to C$22.61.
In company news, Canada's Mega Brands MB.TO, down 18.9 percent at C$6.40, reported a 97 percent fall in adjusted fourth-quarter profit as rising competition in the United States and increased costs ate into the toymaker's margins.
Editing by Peter Galloway