CANADA STOCKS-Banks, materials take TSX to 2-week low as Fed stays course

Wed Jul 31, 2013 5:30pm EDT
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* TSX falls 95.11 points, or 0.76 percent, to 12,486.64
    * Eight of 10 main sectors decline
    * Talisman drops after quarterly loss

    By John Tilak
    TORONTO, July 31 (Reuters) - Canada's main stock index
slipped on Wednesday to its lowest closing level in two weeks,
dragged by declines in materials and financials, as investors
digested a statement from the Federal Reserve that the U.S.
central bank will continue its bond-buying stimulus program.
    Weakness in Potash Corp, which extended its
declines after news of the breakup of a Russian-Belarussian
potash joint venture on Tuesday sent shockwaves through the
industry, further weighed on the market. 
    Data showed U.S. economic growth unexpectedly accelerated in
the second quarter, laying a firmer foundation for the rest of
the year that could bring the Federal Reserve a step closer to
cutting back its monetary stimulus. 
    The resource-heavy Toronto market declined far more sharply
than U.S. stocks, extending a theme of underperformance this
    The market has slightly warmed up to material stocks in
recent weeks, said Paul Taylor, chief investment officer at BMO
Asset Management.
    "But is there any permanent change in investor behavior
related to the commodity sector? The answer is no," he said.
"The case for a sustainable, predictable run in commodity prices
is just not there."
    The U.S. Federal Reserve said the economy continues to
recover but is still in need of support, offering no indication
that it is planning to reduce its bond-buying stimulus at its
next meeting in September. 
    "The Fed is managing the message very carefully," Taylor
said. "They're making every attempt to stay on story."
    "They want to keep repeating that the tapering is
data-dependent and ensure investors understand that it's not
that we're automatically in a period of rising interest rates,"
he added.
    The Toronto Stock Exchange's S&P/TSX composite index
 closed down 95.11 points, or 0.76 percent, at
12,486.64, at its lowest since July 15.
    Eight of the 10 main sectors on the index were in the red.
    Financials, the index's most heavily weighted sector, lost
0.8 percent.
    Royal Bank of Canada, the country's biggest lender,
dipped 1.1 percent to C$64.16, and Toronto Dominion Bank 
fell 0.8 percent to C$86.56.
    Shares of energy producers fell slightly, with gains in
Canadian Natural Resources Ltd offset by a weakness in
Talisman Energy Inc. 
    Talisman posted a surprise second-quarter loss and said it
now expects full-year production to be at the lower end of its
earlier forecast range due to a drop in output from its North
Sea operations. The stock lost 2.5 percent to settle at C$11.64.
    The materials sector, which includes mining stocks, stumbled
2.5 percent. Potash slid 8.8 percent to C$29.80 and had the
biggest negative influence on the market.
    Gold miners also declined. Barrick Gold Corp shed
4.1 percent to C$17.00.
    In other news, Torstar Corp warned that print
revenue would remain under pressure in the second half of the
year, after reporting a fifth straight fall in quarterly profit.
Shares of the owner of Canada's largest daily newspaper by
circulation fell 5 percent to C$5.65. 
    CGI Group Inc shot up 9.8 percent to C$35.50 after
the company reported quarterly results, while Intact Financial
Corp jumped 2.8 percent to C$60.41 after the insurer
reported a stronger-than-expected profit on Wednesday.