April 24, 2012 / 1:12 PM / 6 years ago

Lagging resource stocks drag TSX into doldrums

TORONTO (Reuters) - Toronto’s main stock index ended slightly lower on Tuesday as pessimism about resource shares offset enthusiasm over solid North American earnings and successful European government debt auctions.

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch

Three of the top five laggards were commodity-related shares, including Potash Corp, down 0.9 percent to C$42.03, Enbridge Inc, down 1.1 percent to C$39.07, and Canadian Natural Resources, off 0.6 percent to C$31.30.

“(Resource stocks) are definitely in the doldrums and I think it looks like it could be that way for a while,” said Douglas Davis, chief executive officer at Davis-Rea.

He noted that resource shares were hurting the market despite higher commodity prices on Tuesday, as fears of a slowdown in Europe and China have hit investor confidence.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 8.85 points, or 0.07 percent, at 11,980.10, after spending much of the day in positive territory.

“There’s been no conviction the whole month. Any profits that you have seem to vaporize by the end of the day,” said Barry Schwartz, portfolio manager at Baskin Financials Services.

“What investors should be focusing on is the earnings ... from the expectation of being a lousy (U.S.) quarter, this is turning out to be one of the best quarters since the recovery started.”

With results in from 153 S&P 500 companies, more than three-fourths have topped analyst estimates, according to Thomson Reuters Proprietary Research

Seven of the TSX’s 10 main sectors were softer, including all three powerhouses - financials, materials and energy.

The TSX was lagging a rise in U.S. markets and overseas, which reacted more positively to news the Netherlands successfully completed a bond auction a day after its government collapsed in a crisis over budget cuts.

The biggest Dutch opposition parties refused to back austerity cuts needed to meet EU budget targets after the government fell, deepening the crisis in a nation probably facing a long period of uncertainty until elections.

Meanwhile, in Spain and Italy, bond auctions also were well covered. But their borrowing costs rose again, showing political uncertainty remained uppermost in investors’ minds.

In domestic company news, Canadian National Railway, the most influential gainer, jumped 2.3 percent to C$81.24, after reporting late on Monday that its full-year earnings would come in at the top end of an earlier forecast.

“We typically see profit trends largely move in the same direction both between the TSX and the S&P 500, but there are some key differences ... our view is the start we got so far bodes well for first-quarter profits for the TSX as well,” said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis.

Still, Fehr noted the tug of war going on in markets with healthy North American data and corporate profits on one side and concerns about China and Europe on the other.

Teck Resources rose 1.5 percent to C$35.85 after it reported a 13 percent increase in quarterly operating profit on strong coal pricing and volumes.

Celestica Inc surged nearly 6 percent to C$8.85 after the contract electronics manufacturer posted a 44 percent rise in first-quarter net profit and said customer demand is stabilizing.

Editing by Dan Grebler

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