CANADA STOCKS-TSX slumps after central bank moves

Thu Jul 5, 2012 11:35am EDT
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* TSX down 32.55 points, or 0.3 percent, at 11,881.32
    * Energy, mining shares lead losses
    * ECB, China, BoE moves fail to lift market
    * Mixed U.S. data offers little direction

    By Jon Cook
    TORONTO, July 5 (Reuters) - Canada's resource-heavy main
stock index fell early on Thursday, led by energy and mining
shares, as markets responded negatively to moves by central
banks in Europe, China and England to help shore up their
slumping economies.
    Commodity prices 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. 
    The slide in the euro against the U.S. dollar made it more
expensive for investors to buy commodities priced in dollars.
    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. 
    Markets had rallied to start the month after European
leaders agreed last week on measures to cut soaring borrowing
costs in Italy and Spain and recapitalize banks. But Spanish and
Italian bond yields spiked on Thursday after Draghi's remarks.
    "Today they may be having a little more sober reflection,"
said Robert McWhirter, president and portfolio manager at
Selective Asset Management Inc.
    Seven of Canada's 10 main sectors were in the red, led by
the oil and gas group, which fell 0.6 percent. Materials, which
includes miners, slipped 0.2 percent.
    The most influential decliners included Suncor Energy
, down 1.6 percent at C$30.62, Canadian Natural Resources
, which dropped 1.3 percent to C$27.98 and Goldcorp Inc
, off 1.5 percent at C$39.75.
    Barrick Gold, the world's largest gold miner, sank
0.8 percent to C$38.55 after Argentina's Supreme Court ruled on
Tuesday that key articles of a glacier protection law should
apply in a northern province where the gold producer is building
a huge mine high in the Andes. 
    At 11:11 a.m. (1511 GMT), the Toronto Stock Exchange's
S&P/TSX composite index was down 32.55 points, or 0.3
percent, at 11,881.32.
    Canadian financial stocks also edged down 0.3 percent.
Losses were led by Royal Bank of Canada, which dipped
0.6 percent to C$53.38, Bank of Montreal, down 0.7
percent at C$57.36 and top insurer Manulife Financial Corp
, which fell 1 percent to C$11.33.
    The index was on track to post its first loss in a week,
after its longest gaining streak in about a year.
    "There have been significant moves in the last week but the
start of this rebound from oversold (conditions) and improvement
in the market started almost a month ago," McWhirter said.
    The ECB move offset initial gains after the Chinese central
bank cut its rate for the second time in a month to stave off
further economic slow down. 
    The Bank of England also said it was holding rates steady at
0.5 percent, but did expand its quantitative easing program by
50 billion pounds ($78 billion) as expected.
    Mixed U.S. data also kept investors guessing on the state of
the world's top economy. Data on Thursday showed U.S. private
employers added 176,000 jobs in June and weekly jobless claims
fell by the most in two months. However, June retail sales
disappointed, casting a further shadow on the strength of the
U.S recovery.   
    "There is still a concern about U.S. consumer confidence,"
said McWhirter. "If things are slowing down now as far as retail
sales, what happens when people start to really do some serious
navel gazing with regard to the fiscal cliff as we head into the
fourth quarter?"