March 8, 2011 / 2:48 PM / 7 years ago

Weaker oils, golds pull TSX to 1-week low

TORONTO (Reuters) - Toronto’s main stock index tumbled for a second day on Tuesday, closing at its lowest level in more than a week, as oil companies and gold miners succumbed to softer commodity prices, though strength in financial issues helped limit the losses.

The index’s weighty energy and materials sectors were both down sharply, off 2.6 percent and 1 percent respectively.

Oil prices slipped after Kuwait’s oil minister said OPEC was considering boosting production for the first time in more than two years, soothing investors’ anxiety over spreading civil unrest in North Africa and the Middle East.

Easing crude prices -- with U.S. futures settling around $105 and Brent near $113 -- also tarnished the safe-haven allure of gold. U.S. gold futures for April fell below $1,430 an ounce after hitting a record high of $1,445.70 on Monday. Copper prices, however, bounced back from a two-week low.

Among the heaviest decliners, Suncor Energy sagged 4.2 percent to C$43.67, Canadian Natural Resources, dropped 3.4 percent to C$46.46, while Barrick Gold Corp fell 1.4 percent to C$50.80.

“Certainly last week was a very strong week for Canadian equities, so today is a continuation of the pullback we saw yesterday,” said Jason Hornett, vice-president and fund manager at Bissett Investment Management in Calgary.

“Investors in Canada are probably repositioning their portfolios ... lowering their risk as we are seeing some strength in the consumer staples and other defensive groups,” Hornett added, noting a better performance for utilities and pipeline companies.

Fertilizer producers were also big laggards as violent clashes in Libya and inflated oil prices continue to weigh on the outlook for a global economic recovery. Potash Corp, the world’s largest fertilizer maker, extended its recent losses, falling 1.4 percent to C$56.67.

Hornett said investors were mostly taking profits in that sector, given its recent robust performance, noting that underlying commodity prices were still quite strong.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 79.38 points, or 0.56 percent, at 14,012.97, following Monday’s 160-point dive. It was the lowest close since February 24.

“The problem, whether it’s Bahrain or Egypt, Algeria, Libya -- heaven forbid Saudi Arabia -- is going to be with us for some time,” said John Kinsey, portfolio manager at Caldwell Securities.

“It’s not something that’s going to go away any time soon, so I think that we will get some volatility in the oil price for a ways yet.”

Among the gainers on Tuesday, financials were up 0.5 percent as a recent spate of impressive quarterly bank earnings continued to boost the sector.

Bank of Nova Scotia skidded 1.7 percent to C$59.15, however, despite reporting an 18 percent increase in quarterly profit and raising its dividend.

The results topped analyst estimates, but still failed to satisfy high expectations built up by strong earnings from other domestic banks in recent days.

“I‘m surprised that Bank of Nova Scotia is down as much as it is today, considering that they were the second of the big five banks to announce a dividend increase,” added Hornett, referring to Toronto-Dominion Bank’s move last week.

“I guess investors were spoiled.”

Looking ahead, market watchers will be paying close attention to the outcome of violent clashes in Libya, and volatile oil prices.

As well, there are renewed debt worries in the euro zone, after Greece was hit with another sovereign credit downgrade on Monday and as Portugal braces for the auction of 1 billion euros in bonds on Wednesday.

($1=$0.97 Canadian)

Reporting by Claire Sibonney; editing by Rob Wilson

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