TSX dips on central bank moves; awaits U.S. jobs data

Thu Jul 5, 2012 5:15pm EDT
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By Jon Cook

TORONTO (Reuters) - Canadian stocks ended their longest rally in a year on Thursday, led lower by energy shares, as markets interpreted easing measures by central banks in Europe, China and England as a sign the global economy is weakening.

Equity markets slumped along with the euro after the European Central Bank cut its main interest rate to a record low and reduced its deposit rate to zero to help tackle the euro zone debt crisis. <MKTS/GLOB>

The slide in the euro against the U.S. dollar made it more expensive for investors to buy commodities priced in dollars. U.S. oil futures, gold and base metals all retreated, hurting Canada's resource-heavy index. <O/R> <GOL/> <MET/L>

Stimulus moves by central banks usually boost commodities, said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri. That was not the case on Thursday.

"The other read through from the action we got from central banks today is that the global economy is slowing down to some degree and that's conversely weighing on commodity prices," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.

Negative sentiment was compounded by comments from ECB President Mario Draghi, who said at a press conference after the rate announcement that the ECB sees a weakening of growth in the whole of the euro zone area and that downside risks to growth are materializing.

European equities and commodities initially gained after the Bank of England expanded its quantitative easing program and China dropped rates for a second time in two months.

All of Canada's 10 main sectors were in the red, led by the oil and gas group, which fell 1.7 percent. Materials, which includes miners, slipped 0.8 percent.   Continued...

An electronic board displays the midday TSX index in Toronto February 16, 2011. REUTERS/Mark Blinch