TSX slides as stimulus hopes dim; Rona caps losses

Tue Jul 31, 2012 5:04pm EDT
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By Jon Cook

TORONTO (Reuters) - Canadian stocks had their biggest one-day drop in more than two weeks on Tuesday, led by energy and mining shares, as hopes dimmed that the U.S. Federal Reserve would announce new stimulus measures at its policy meeting this week.

A more than 13 percent surge in the shares of home-improvement retailer Rona Inc RON.TO after a takeover bid from a U.S. rival helped limit losses.

Despite the day's decline, the TSX still ended July up 0.6 percent, its second straight monthly increase after a dismal May.

Equities have rallied recently on expectations that the Fed and the European Central Bank would announce new measures to stimulate growth at their policy meetings this week. The U.S. central bank began its two-day meeting on Tuesday, and the ECB will meet on Thursday.

But better-than-expected U.S. housing and manufacturing data on Tuesday helped lower expectations the Fed would announce new stimulus plans when it issues its policy statement on Wednesday.

"It was a lot of motion, but very little action," said John Ing, president of Maison Placements Canada. "Central bankers always hold out hope as a carrot, hoping the markets will accept that in place of actually substantive policy moves."

Single-family home prices rose for the fourth month in a row in May, and the pace of business activity in the U.S. Midwest picked up in July. Separate government data showed spending by American consumers fell in June for the first time in nearly a year.

"The numbers are not good enough to dance from the rooftops and they're not bad enough for full-scale, all-hands-on-deck-type money printing," said Barry Schwartz, vice president and portfolio manager at Baskin Financial Services.   Continued...

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