TORONTO (Reuters) - Canadian stocks ended their longest rally in a year on Thursday, led lower by energy shares, as markets interpreted easing measures by central banks in Europe, China and England as a sign the global economy is weakening.
Equity markets slumped along with the euro after the European Central Bank cut its main interest rate to a record low and reduced its deposit rate to zero to help tackle the euro zone debt crisis. <MKTS/GLOB>
The slide in the euro against the U.S. dollar made it more expensive for investors to buy commodities priced in dollars. U.S. oil futures, gold and base metals all retreated, hurting Canada's resource-heavy index. <O/R> <GOL/> <MET/L>
Stimulus moves by central banks usually boost commodities, said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri. That was not the case on Thursday.
"The other read through from the action we got from central banks today is that the global economy is slowing down to some degree and that's conversely weighing on commodity prices," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.
Negative sentiment was compounded by comments from ECB President Mario Draghi, who said at a press conference after the rate announcement that the ECB sees a weakening of growth in the whole of the euro zone area and that downside risks to growth are materializing.
European equities and commodities initially gained after the Bank of England expanded its quantitative easing program and China dropped rates for a second time in two months.
All of Canada's 10 main sectors were in the red, led by the oil and gas group, which fell 1.7 percent. Materials, which includes miners, slipped 0.8 percent.
The most influential decliners included Suncor Energy (SU.TO), down 2.3 percent at C$30.40, Canadian Natural Resources (CNQ.TO), which dropped 2.8 percent to C$27.54, Goldcorp Inc (G.TO), off 2.6 percent at C$39.30, and Yamana Gold (YRI.TO), which sank 3.4 percent to C$16.22.
Barrick Gold (ABX.TO), the world's largest gold miner, edged down 0.7 percent to C$38.58 after Argentina's Supreme Court ruled earlier this week that key articles of a glacier protection law should apply in a northern province where the gold producer is building a huge mine high in the Andes.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE finished down 96.96 points, or 0.8 percent, at 11,816.91. The loss ended a streak of six straight increases, matching a similar run from June 27 to July 5, 2011.
Markets had rallied to start the month after European leaders agreed last week on measures to cut soaring borrowing costs in Italy and Spain and recapitalize banks. But Spanish and Italian bond yields spiked on Thursday after Draghi's remarks.
"Today they may be having a little more sober reflection," said Robert McWhirter, president and portfolio manager at Selective Asset Management Inc.
Canadian financial stocks also edged down 0.4 percent. Losses were led by top insurer Manulife Financial Corp (MFC.TO), which fell 1.8 percent to C$11.24, Brookfield Office Properties Inc BPO.TO, down 1.5 percent to C$18.05, and Royal Bank of Canada (RY.TO), which dipped 0.3 percent to C$53.53.
Another factor weighing on the downside was SXC Healthcare Solutions SXC.TO, whose shares plunged nearly 6 percent to C$99.50. The slide came after a big jump in the stock the previous session following a shift in the weighting of the TSX announced after market close on Tuesday.
Mixed U.S. data also kept investors guessing on the state of the world's top economy. Data on Thursday showed U.S. private employers added 176,000 jobs in June and weekly jobless claims fell by the most in two months. However, June retail sales disappointed, casting a further shadow on the strength of the U.S. recovery.
Economists do not expect Friday's Canadian and U.S. payrolls reports for June to dispel concerns that the North American recovery is losing steam.
"The market's probably in a bit of suspension today waiting on the headline number tomorrow, which is the U.S. employment report," said Fehr. "If we get a better-than-expected number there it would certainly lift spirits in the market."
Editing by Andrew Hay