Fed, RBC drive TSX to worst day in 4 weeks
By Claire Sibonney
TORONTO (Reuters) - Toronto's main stock index marked its biggest one-day drop in four weeks on Tuesday, on lowered expectations for more U.S. central bank stimulus, tumbling commodities and slipping shares of Royal Bank of Canada RY.TO, accused by U.S. regulators of running a trading scheme "of massive proportion."
RBC was the most influential decliner, down 2.8 percent to C$57.10 following a lawsuit filed on Monday by the Commodity Futures Trading Commission.
The lawsuit alleges that a small group of senior RBC employees created and managed a "wash trading" strategy in which they improperly coordinated buying and selling of stock futures by bank subsidiaries, without them taking a position in the market, in order to gain the Canadian tax credits. RBC has called the claims "absurd.
"Certainly RBC has had some impact here ... it could potentially be significant in terms of the fines they could incur," said Michael Sprung, president at Sprung and Co. Investment Counsel, an RBC shareholder.
"Maybe the market is a little bit ahead of itself in penalizing the company to the extent that it has."
Canadian stocks underperformed Wall Street significantly on Tuesday. .N Financials were down 1.3 percent, materials knocked off 3.1 percent and energy shares lost 1.6 percent.
Stocks had extended earlier losses after minutes from the latest U.S. central bank meeting showed Federal Reserve policymakers appear less keen to launch a fresh round of monetary stimulus as the U.S. economy improves.
"The market got excited about the prospect that the Fed might provide further hints towards quantitative easing and it didn't get that, so there's been a backlash because of that and we're seeing asset markets in general sell off," said Fergal Smith, managing market strategist at Action Economics. Continued...