CANADA STOCKS-TSX nets small gain on higher oil prices

Mon Jul 16, 2012 5:17pm EDT
 
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* TSX ends up 6.65 pts, or 0.1 pct, at 11,521.18
    * China, U.S. stimulus hopes boost oil
    * Financials fall on Europe bailout worries
    * U.S. June retail sales disappoint

    By Jon Cook
    TORONTO, July 16 (Reuters) - Canada's main stock index kept
its head above water on Monday, buoyed by higher oil prices, but
gains were offset by financial sector losses spurred by weak
U.S. retail sales data and concerns about crucial euro zone
bailout funds.
    U.S. oil prices were lifted by hopes that signs of economic
slowing will prompt stimulus measures, especially in China.
Another factor was escalating tensions in the Middle East, after
a U.S. Navy vessel near the United Arab Emirates fired on a
small boat that failed to heed warnings. 
    Canada's heavyweight energy sector rose 0.8 percent to lift
the broader index into positive territory. Leading the way was
Suncor Energy, the country's largest oil and gas
company, which climbed 1 percent to C$29.72.
    Shares of MEG Energy Corp jumped more than 7
percent to C$38.05 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. 
    Oil and gas shares got a boost from remarks by Chinese
Premier Wen Jiabao, who said Beijing would step up efforts to
boost the economy in the aftermath of Friday's second-quarter
GDP figures that showed the world's second-largest economy is
slowing. 
    Gains were held in check, however, as more worrying data
came in from Canada's largest trading partner. U.S. retail sales
fell 0.5 percent in June, the third straight month of decline,
as demand slumped for everything from cars to electronics and
building materials, a sign the U.S. economic recovery is
flagging. 
    "Consumers in the U.S. continue to pay down their debt and
de-leverage and when they're doing that, having weaker sales is
not unexpected," said Arthur Salzer, chief executive officer of
Northland Wealth Management.
    Markets looked ahead to Federal Reserve Chairman Ben
Bernanke's semiannual 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
from the U.S. central bank.
    "It's like when you've got a patient who is losing blood and
if you don't keep putting plasma and blood into the patient, you
end up with a coronary arrest," said Salzer. "The Fed is pulling
out most of the stops to keep the consumer in the U.S. alive."
    Six of Canada's 10 main sectors were lower. The financial
index led losses, falling 0.2 percent.
    The biggest decliners included Royal Bank of Canada,
off 0.6 percent at C$52.18, Manulife Financial Corp,
down 1.5 percent to C$10.72, and Bank of Nova Scotia,
which slipped 0.2 percent to C$52.13.
    The Toronto Stock Exchange's S&P/TSX composite index
 closed up 6.65 points, or 0.1 percent, at 11,521.18.
    European equities were hurt by a report in The Wall Street
Journal 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," said Fergal
Smith, managing market strategist at Action Economics.
    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 0.1 percent as base metals prices dipped on global
demand worries.  
    Losses were led by copper miner First Quantum Minerals
 dropped 3.2 percent to C$16.97 and Goldcorp,
which sank 0.6 percent to C$34.33.