TSX rally fizzles as Greek fears mount

Wed May 16, 2012 4:50pm EDT
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By Jon Cook

TORONTO (Reuters) - Canada's main stock index fell to a seven-month low on Wednesday after news that the European Central Bank had stopped funding operations for some Greek banks rattled financial markets, erasing resource gains on the back of strong U.S. economic data.

Markets retreated after the ECB confirmed a Reuters report that it had ceased providing liquidity to some of Greece's most undercapitalized banks, adding to concerns the debt-ravaged country may soon leave the euro zone.

After the news hit, Canadian Finance Minister Jim Flaherty told the Senate's banking committee: "These are not good developments, this can create a shock that will affect Canada.

Canadian stocks erased gains and traded weaker after the latest news from Europe, led by the heavyweight energy sector, which sank 0.7 percent.

"There's a fatigue over the price declines we've had in the materials/resource sectors which has been pretty dramatic," said Paul Hand, managing director at RBC Capital Markets.

Prominent decliners included Suncor Energy (SU.TO: Quote), down 1 percent to C$27.39, Cameco Corp (CCO.TO: Quote), which fell 2.1 percent to C$19.61, and Crescent Point Energy Corp (CPG.TO: Quote), sliding 2.9 percent to C$38.88.

Financial stocks edged down 0.4 percent, shrugging off efforts on Tuesday by German Chancellor Angela Merkel and new French President Francois Hollande to quell talk of a possible Greek exit from the euro zone.

Top insurer Manulife Financial (MFC.TO: Quote) was the biggest laggard, falling 3.3 percent to C$11.25. Major lenders Toronto-Dominion Bank (TD.TO: Quote) and Bank of Nova Scotia (BNS.TO: Quote) each slipped 0.3 percent to C$78.93 and C$52.36 respectively.   Continued...

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch