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* TSX down 38.11 points, or 0.31 percent, at 12,258.61 * All 10 main sectors decline * Gold miners Barrick, Goldcorp stumble By John Tilak TORONTO, Dec 17 (Reuters) - Canada's main stock index fell to a one-week low on Monday, led down by its materials and financial sectors as investors stayed cautious as they sought clarity on what is happening in U.S. talks to avoid a budget crisis. The materials sector, which includes mining stocks, shed 1 percent after gold prices dropped early in the day. Barrick Gold Corp was down 1.2 percent at C$33.52, and Goldcorp Inc <G.TO fell 1.3 percent to C$36.02. Gold prices later erased losses as prospects for monetary stimulus in Japan countered uncertainty over the outlook for the U.S. budget talks. Although there appeared to be signs of progress in negotiations between congressional Republicans and the White House on averting tax hikes and spending cuts due to kick in automatically early in 2013, threatening a recession, the market remained cautious. "Investors may be hedging their bets. If nothing happens, they want to see what effect that's going to have on the marketplace, whether it's already priced in," said Irwin Michael, portfolio manager at ABC Funds. "It's very, very quiet. We expect the market to be very thin and extremely volatile," he said. At midmorning, the Toronto Stock Exchange's S&P/TSX composite index was down 38.11 points, or 0.31 percent, at 12,258.61. All 10 main index sectors were in the red. Earlier in the session the index hit 12,237.93, its lowest point since Dec. 10. "The sentiment is people would like to be bullish, but they are waiting for that catalyst, the fiscal cliff or maybe more indication that the economy is turning around. Once that happens, we suspect it could feed upon itself and the market could go significantly higher in 2013," Michael said. In company news, miner First Quantum Minerals Ltd launched a hostile sweetened offer for Canadian rival Inmet Mining Corp that values the owner of the giant Cobre Panama copper project at about C$5.1 billion ($5.2 billion). Shares of First Quantum were down nearly 3 percent at C$20.37, while Inmet gained 5 percent to C$73.25. The financial sector, the index's largest, was down 0.5 percent, with Royal Bank of Canada falling 0.7 percent to C$58.75, and Bank of Nova Scotia declining 0.5 percent to C$56.56. Sun Life Financial Inc lost 2 percent to C$27.28 after Canada's third-biggest insurer said it will sell its U.S. annuity business and some life insurance businesses for $1.35 billion to a company owned by shareholders of institutional asset manager Guggenheim Partners..