CANADA STOCKS-TSX flat as energy gains offset financial losses

Mon Jul 16, 2012 12:05pm EDT
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* TSX down 7.38 points, or 0.1 percent, at 11,507.15
    * Financials fall on Europe bailout worries
    * U.S. June retail sales disappoint
    * China, U.S. stimulus hopes boost energy shares

    By Jon Cook
    TORONTO, July 16 (Reuters) - Canada's main stock index was
little changed on Monday near midday, as financial shares slid
on concerns about Europe's bailout deals and after weak U.S.
retail data, but losses were limited by hope Beijing would act
to boost Chinese growth.
    U.S. retail sales fell 0.5 percent in June, the third
straight month of decline, as demand slumped for everything from
cars and electronics to building materials, a sign the economic
recovery is flagging. 
    Job creation in the United States has slowed dramatically in
the last few months as employers worry about a sagging global
economy hurt by Europe's snowballing debt crisis.
    "European stress is still a major headwind for the market,"
said Fergal Smith, managing market strategist at Action
    Seven of Canada's 10 main sectors were lower. The financial
index led declines, falling 0.3 percent.
    The biggest decliners included Royal Bank of Canada,
off 0.7 percent at C$52.13, Manulife Financial Corp,
down 2.4 percent to C$10.62, and Bank of Nova Scotia,
which slipped 0.3 percent to C$52.09.
    On Monday, the International Monetary Fund slashed its
forecast for global economic growth, urging European
policymakers to take bolder action to stem their crisis and
warning that China's economy risks a hard landing.
    Meanwhile, European equities were hurt by a Wall Street
Journal report that said European Central Bank President Mario
Draghi advocated imposing losses on holders of senior bonds
issued by the worst hit Spanish savings banks.
    The ECB declined to comment on the report, which also said
finance ministers rejected the advice due to concerns financial
markets would react badly to such a decision. 
    "So far as the ECB is considering forcing bondholders to
share in losses, that's a negative for financials," Smith said.
    Around 11:45 a.m. EDT (1545 GMT), the Toronto Stock
Exchange's S&P/TSX composite index was down 7.38
points, or 0.1 percent, at 11,507.15.
    Financial markets were also disappointed by news that
Germany's Constitutional Court will take a couple months to
reach a verdict on whether the euro zone's bailout fund, the
European Stability Mechanism, is compatible with German law.
    The heavily-weighted materials group, which includes miners,
edged down 0.3 percent as gold and base metals prices dipped on
global demand worries.  
    Top gold miner Barrick Gold led losses, shedding
0.5 percent to C$35.16. Ivanhoe Mines tumbled nearly 5
percent to C$8.09 and copper miner First Quantum Minerals
 dropped 2.3 percent to C$17.13.
    But losses were reined in by hopes of further stimulus from
top consumer China after Premier Wen Jiabao said Beijing would
step up efforts to boost the economy, though investors were
mindful stimulus efforts would take time to bear fruit.
    Chinese stimulus hopes drove Canadian energy shares up 0.5
percent. Suncor Energy, the country's largest oil and
gas company, climbed 0.9 percent to C$29.68.
    Shares of MEG Energy Corp jumped more than 5
percent to C$37.39 after the company said on Monday it would
boost capital spending by C$380 million ($374.1 million) this
year as it looks to raise output from its existing oil sands
operations by a third. 
    Trading was also subdued ahead of Federal Reserve Chairman
Ben Bernanke's testimony before congressional panels on Tuesday
and Wednesday. Investors will parse his words for clues about
the possibility and timing of another round of stimulus.
    The yield on benchmark 10-year Treasury notes 
fell to 1.442 percent, matching the level set on June 1, which
was the lowest going back to the early 1800s.
    "This week Bernanke's testimony will be the major driver,"
said Smith. "The market has begun to lean towards additional
stimulus, so that's one reason why bond yields are probing
historic lows again."