CANADA STOCKS-TSX falls as resources drop on China rate hike

Tue Oct 19, 2010 5:17pm EDT
 
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 * TSX falls 0.77 percent to 12,570.55
 * Resources tumble on surprise Chinese rate hike
 * EnCana to kick off Canada's earnings season on Wednesday
 (Adds details)
 By Ka Yan Ng
 TORONTO, Oct 19 (Reuters) - Toronto's main stock index fell
sharply to a one-week low on Tuesday as resource shares bore
the brunt of a selloff sparked by China's unexpected decision
to raise interest rates.
 The index's heavily weighted energy and materials groups
were the chief decliners, down 1.4 percent and 2.8 percent,
respectively.
 Gold, base-metals and oil prices all tumbled, and the
safe-haven U.S. dollar rose, as the first Chinese rate hike in
nearly three years caught investors off guard and raised
concern that the world's fastest growing economy would start to
cool. [ID:nSGE69I0HU]
 The price of oil swooned more than 4 percent to below $80 a
barrel, suffering its biggest one-day percentage loss since
February, while gold was knocked down as much as 2.7 percent.
[O/R] [GOL/]
 "We had an increase in interest rates in China for the
first time in a while. That's putting a bit of concern that the
brakes are going to be put on there, in terms of their growth,"
said John Kurgan, senior market strategist at Lind-Waldock.
 "The commodity sectors for the most part took a hit here."
 Key decliners were largely gold-mining stocks and big
energy names. Barrick Gold ABX.TO fell 3.3 percent to
C$46.91, while Goldcorp G.TO sagged 2.6 percent to C$43.45.
Canadian Natural Resources CNQ.TO lost 1.4 percent to
C$37.28, while Suncor Energy SU.TO slid 0.92 percent at
C$34.32.
 "The market has been driven higher by looser monetary
policy globally, but now China has surprised the market by
tightening policy, that's seen as a rethink on stocks and on
gold prices, which have been driven higher by monetary
stimulus," said Fergal Smith, managing market strategist at
Action Economics.
  Meanwhile, the Bank of Canada moved to the sidelines by
leaving its benchmark interest rate unchanged at 1 percent, as
expected, and surprised markets with a dovish statement in
which it cut economic growth forecasts and suggested rates will
stay on hold. [ID:nN19118876]
 The Toronto Stock Exchange's S&P/TSX composite index
.GSPTSE closed 97.46 points, or 0.77 percent, lower at
12,570.55 after dropping more than 1 percent earlier in the
day. Half of the index's 10 main groups closed lower.
 Also weighing on sentiment, results from U.S. technology
titans Apple Inc AAPL.O and IBM IBM.N disappointed
investors and raised doubts about the strength of third-quarter
earnings. [.N]
 Financial shares clawed back into positive territory after
tracking tumbling U.S. bank shares, which felt renewed pressure
over mortgage foreclosures, earlier in the day.
[ID:nN19106691]
 Canada's six biggest banks all closed higher, with the
index's financials group up 0.4 percent, rising for a third
straight session.
 Lind-Waldock's Kurgan said the Toronto market's retreat was
long overdue, and that investors will be mindful of what
earnings news Canadian companies will offer over the next
several weeks. EnCana ECA.TO will start the burst of
corporate results on Wednesday. 
 ($1=$1.03 Canadian)
 (Additional reporting by Claire Sibonney; editing by Peter
Galloway)