September 8, 2010 / 7:30 PM / in 7 years

CANADA STOCKS-TSX falls on Fed report, gold-miner swoon

* TSX down 8.50 points at 12,092.55

* Eight of index’s 10 sectors lower (Updates to afternoon)

By Claire Sibonney

TORONTO, Sept 8 (Reuters) - Toronto’s main stock market index turned lower on Wednesday afternoon as commodity shares fell and investor optimism was clouded by a U.S. Federal Reserve report that flashed signals of slowing economic growth.

Among the heavyweight decliners were gold miners, down 1.2 percent, and energy producers, down 0.3 percent -- despite strength in commodity prices, particularly gold, which neared a record high. [GOL/] [O/R]

Oil company Canadian Natural Resources (CNQ.TO) dropped 0.7 percent to C$34.51, while miner Goldcorp Inc (G.TO) fell 1.6 percent to C$43.63, while.

“Maybe if (the gold price) does break though there and get to an all-time high that will drag the stocks higher in the next couple of days,” said John Kinsey, portfolio manager at Caldwell Securities.

“Again they’ve had a pretty good run ... I think today we’re just getting a bit of a pause.”

Earlier in the day, financial stocks, up 0.6 percent, led the TSX higher after a newspaper report said that Canada’s bank watchdog may soon free banks to raise dividends, buy back shares, and make major acquisitions after imposing an unofficial moratorium to conserve bank capital during the financial crisis. [ID:nN08109368]

Bank of Montreal (BMO.TO) jumped 2.1 percent to C$60.36, Royal Bank of Canada (RY.TO) rose 0.9 percent to C$52.91, and Toronto-Dominion Bank (TD.TO) was up 1.1 percent at C$74.39.

Paul Taylor, chief investment officer at BMO Harris Investment Management, said the “the hint of dividend increases as a result of clarified capital requirements” was behind the the sector’s rally.

At 2:55 p.m. (1855 GMT), the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 8.50 points, or 0.1 percent, at 12,092.55. Eight of the index’s 10 groups were lower. Industrials were 0.3 percent higher.

Dragging on sentiment, the Fed’s Beige Book report showed growth eased in the six weeks through the end of August, suggesting the recovery was faltering along the East Coast and in the Midwest. [ID:nWAL8KE6JM]

“The (Fed) seems to be more bearish on the economic recovery than maybe the market is, but it was sort of every time (Chairman) Bernanke opened his mouth the market went down,” Kinsey said, noting, however, that U.S. stocks were still in positive territory.

“In the old days, the U.S. sneezed and Canada caught cold ... but I think that’s changing somewhat and I think China now has taken the lead in quite a few areas.”

Investors also digested the Bank of Canada’s decision on Wednesday to raise its benchmark interest rate for a third consecutive time this year, nudging the rate up 25 basis points to 1 percent. Taylor said the move had already been largely priced in by the market. [ID:nN08241537]

Other data on Wednesday showed U.S. chain store sales increased last week, and U.S. consumer credit outstanding fell less than expected. [ID:nN08124223]

In Canada, the Ivey Purchasing Managers Index and building permits came in better than expected. [ID:nTAR001655] [ID:nN0865393]

$1=$1.04 Canadian Reporting by Claire Sibonney; editing by Peter Galloway

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