CANADA STOCKS-TSX falls on weak data; stimulus hopes curb losses

Wed Jul 25, 2012 12:33pm EDT
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* TSX down 15.98 pts, or 0.1 pct, at 11,450.97
    * Financials, energy shares lead losses
    * Weak U.S., Europe data weigh on markets
    * Central bank stimulus hopes curb losses
    * Corporate earnings results disappoint

    By Jon Cook
    TORONTO, July 25 (Reuters) - Canadian stocks fell on
Wednesday at midday, led lower by financial and energy shares on
weak U.S. and European data and disappointing earnings, but
hopes of further central bank stimulus limited losses.
    Markets fell after new U.S. single-family home sales in June
fell by the most in more than a year and prices resumed their
downward trend.  
    In Europe, weak economic data from Germany reinforced the
view that even the European Union's biggest economies were being
damaged by the debt crisis. German business sentiment dropped in
July for the third straight month to its lowest level in over
two years, according to the latest survey by the Munich-based
Ifo think tank. 
    The news comes on the heels of a decision by ratings agency
Moody's Investors Service to lower Germany's outlook to negative
from stable.
    "It looks like Germany will avoid a recession, but the
question is for how long?," said Pat McHugh, Canadian equity
strategist at Manulife Asset Management. "The economic news just
keeps getting worse."
     The gloomy global growth outlook was bad news for the
Toronto Stock Exchange's S&P/TSX composite index, as
resource stocks account for about 40 percent of its overall
    On Wednesday, most of the index's 10 main sectors were
lower. The powerhouse financial services and energy groups led
declines, dipping 0.5 percent and 0.3 percent respectively.
    Companies leading the slide included Royal Bank of Canada
, down 1.1 percent to C$50.26, Bank of Nova Scotia
, off 1.1 percent at 50.60, Cenovus Energy,
which slid 2.6 percent to C$31.26, and Encana Corp,
down 3.6 percent at C$20.02.
    Around noon EDT (1600 GMT), the Toronto Stock Exchange's
S&P/TSX composite index was down 15.98 points, or 0.1
percent, at 11,450.97. The index was on track for its fourth
straight loss.
    Equities markets were spared greater losses on the hopes
that the deteriorating global economic conditions would spur
further action on behalf of central banks in the United States
and Europe.
    U.S. investors are watching for signs of further stimulus
from the Federal Reserve, where officials have already started
to think about new tools they can use beyond a possible third
round of quantitative easing, or QE3, to try to strengthen
    "The market has been moving to a certain degree on stimulus
hopes," said McHugh. "The risk-off trade is in full force now.
People are looking at the lower (U.S.) bond yields, they're
thinking QE (is coming) and it's time to do a little hedging."
    European Central Bank Governing Council member Ewald Nowotny
said there were arguments for giving Europe's new permanent
rescue fund a banking license, enabling it to borrow unlimited
central bank money, boosting its capacity to prevent the crisis
from spreading. 
    The news was welcomed by Canada's beaten-down materials
sector, which climbed 0.7 percent as gold mining stocks rallied
with bullion prices. 
    Top gold producers led the way, with Goldcorp jumping
2.5 percent to C$34.49 and Barrick Gold up 1.4 percent
at C$34.24.
    Canadian corporate earnings failed to boost sentiment.
    Teck Resources Inc plunged 5.5 percent to C$27.79
after Canada's largest diversified miner said lower coal and
metal prices contributed to a steeper-than-expected drop in
quarterly profit and that it sees no reprieve anytime soon.
    Shares of Loblaw Cos Ltd fell 1.3 percent to C$31.50
after Canada's biggest grocer reported lower quarterly profit on
Wednesday, as sales growth lagged an increase in expenses.
    Canadian National Railway Co shares slid 1.3
percent to C$86.17, despite Canada's biggest railroad reporting
a 17 percent rise in second-quarter profit. Analysts said
expectations had been high for CN's results and outlook. 
    However, Canadian Pacific Railway, CN's main
competitor, saw its shares jump 2.2 percent to C$76.69 after
reporting its second-quarter net income rose to C$631 million
from C$538 million a year earlier. 
    TransAlta Corp shares tumbled 3.8 percent to C$15.55
after the oil and gas firm said it estimates a loss in the
second-quarter compared with a year earlier due to higher
maintenance costs, losses in energy trading and lower
electricity prices.