CANADA STOCKS-TSX hits 2-wk low, hurt by growth fears, oil price

Thu Aug 30, 2012 2:52pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* TSX falls 112.55 points, or 0.9 percent, to 11,897.24
    * Energy stocks lead decline as oil price eases
    * Global growth worries weigh on investors
    * Shares of most banks fall despite solid results

    By Alastair Sharp
    TORONTO, Aug 30 (Reuters) - Canadian stocks dropped sharply
on Thursday as investors fretted about the state of the global
economy and how central banks might deal with it, brushing off
surprisingly robust earnings from three of the country's big
banks.
    All ten of the benchmark index's main sectors were lower as
losses extended beyond 1 percent in afternoon trade and
investors looked beyond what U.S. Federal Reserve Chairman Ben
Bernanke may hint at in a key speech on Friday, turning their
attention to a meeting of the European Central Bank next week.
    "The market is expecting that we won't necessarily get
anything definitive tomorrow out of Jackson Hole, or if we do,
that it's already reflected in equity valuation levels," said
Paul Taylor, the chief investment officer of fundamental
equities at BMO Asset Management.
    At 2:15 a.m. (1815 GMT) the Toronto Stock Exchange's S&P/TSX
composite index had lost 112.55 points, or 0.9
percent, at 11,897.24. The index was on track for its biggest
one-day fall since early July.
    The index at one point hit 11,875.05, its weakest level
since Aug. 15.
    Limp data on the U.S. labor market coupled with signs that
consumer spending remains robust added to the pessimism as it
neither pointed to a robust recovery nor a bleak environment in
which the Fed would be forced to act. 
    "In some ways you hope that economic data is weak enough
that it forces the Fed's hand. The risk is that it's a little
bit better than awful and therefore the Fed is not compelled to
intervene," Taylor said.
    Others looked further out to an ECB meeting next week at
which the euro zone central bank's president, Mario Draghi, is
expected to flesh out his plans to buy euro bonds. His hints at
such a move in August was credited with helping steady global
markets.  
    "Europe is the problem, and that's where we need some
solutions for other places around the world to feel more
comfortable," said Gareth Watson, vice-president for investment
management and research at Richardson GMP.
    
    ENERGY, BANK STOCKS DRAG
    Toronto stocks were led lower by a 1.44 percent decline in
energy shares that followed a drop in U.S. crude prices. U.S.
crude fell as oil companies assessed damage after Hurricane
Isaac's trek through the region. 
    Financial stocks were among the biggest weights even though
three big Canadian banks reported better-than-expected results
and dividend increases on Thursday.
    The sector had enjoyed a two-day rally after Bank of Nova
Scotia and Bank of Montreal upped their dividends and beat
profit estimates earlier in the week. 
    Toronto-Dominion Bank was down 0.9 percent at
C$80.78 on Thursday even though it narrowly beat expectations
for quarterly profit and raised its dividend by more than
expected. 
    Canadian Imperial Bank of Commerce dropped 0.8
percent to C$75.75 even as it said profit rose 42 percent on
higher lending volumes. 
    But Royal Bank of Canada, the country's largest
lender, bucked the trend, jumping 1.3 percent to C$55.32 after 
it announced a surprise hike in its dividend on the back of a 73
percent rise in profit. 
    However, Bank of Nova Scotia fell 2.4 percent to
C$52.32 after it said late on Wednesday it would buy ING Groep's
 Canadian online bank for C$3.1 billion. 
    "On the whole, the core Canadian banking franchises are
still relatively stable and intact," Watson said. "Credit
quality is not deteriorating too quickly, although in this
environment it's not improving too markedly either."