CANADA STOCKS-TSX reverses losses on stimulus hopes

Wed Jul 25, 2012 1:52pm EDT
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* TSX up 26.86 pts, or 0.2 pct, at 11,493.81
    * Mining stocks boosted by stimulus hopes
    * Financial shares lead losses
    * Weak U.S., Europe data weigh on markets
    * Corporate earnings results disappoint

    By Jon Cook
    TORONTO, July 25 (Reuters) - Canada's main stock index
reversed early losses on Wednesday afternoon, rising with mining
shares, as investors were hopeful that deteriorating global
economic conditions would spur stimulus moves by central banks
in the United States and Europe.
    Weak data from the United States and Europe raised
expectations the Federal Reserve and European Central Bank would
announce more monetary easing measures when they hold meetings
next week.
    ECB 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 and so boosting its capacity to prevent the crisis from
    "The market has been moving to a certain degree on stimulus
hopes," said Pat McHugh, Canadian equity strategist at Manulife
Asset Management. "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."
    The news was welcomed by Canada's beaten-down materials
sector, which climbed 1.7 percent as gold mining stocks rallied
with bullion prices. 
    Top gold producers led the way, with Goldcorp jumping
3.6 percent to C$34.87 and Barrick Gold up 2.2 percent
at C$34.49.
    Around 1:35 p.m. EDT (1735 GMT), the Toronto Stock
Exchange's S&P/TSX composite index was up 26.86
points, or 0.2 percent, at 11,493.81. The index rebounded after
hitting a session low at 11,428.67.
    In the latest troubling sign that the American recovery was
faltering, data on Wednesday showed 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, German business sentiment dropped in July for the
third straight month to its lowest level in over two years,
reinforcing the view that even the euro zone's biggest economy
was being damaged by the debt crisis. 
    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 McHugh. "The economic news just
keeps getting worse."
    Most of Canada's 10 main stock sectors were lower. The
powerhouse financial services led declines, dipping 0.3 percent.
    Leading losses was Royal Bank of Canada, down 0.7
percent to C$50.44, Bank of Nova Scotia, off 0.9
percent at C$50.68, and Toronto-Dominion Bank, which
sagged 0.3 percent to C$78.19.
    Second-quarter earnings from Canada's largest copper miner,
railroad and grocery store chain also failed to excite.
    Teck Resources Inc plunged 5.8 percent to C$27.71
after the 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 2.1 percent to C$31.24
after the grocer reported lower quarterly profit on Wednesday,
as sales growth lagged an increase in expenses. 
    Even Canadian National Railway Co, which reported a
17 percent rise in second-quarter profit, saw its shares slide
0.7 percent to C$86.68. 
    However, shares of Canadian Pacific Railway, CN's
main competitor, jumped 3 percent to C$77.29 after reporting its
second-quarter net income rose to C$631 million from C$538
million a year earlier. 
    TransAlta Corp shares tumbled 3.3 percent to C$15.62
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.