December 6, 2011 / 1:33 PM / in 6 years

TSX retreats on euro zone worries, BMO results

TORONTO (Reuters) - Toronto’s main stock index ended weaker on Tuesday as investors stayed nervous about the stability of the euro zone and as disappointing quarterly results from Bank of Montreal (BMO.TO) pressured the index’s hefty financial sector.

<p>Two men walk down the street from the King and Bay intersection in the financial district in Toronto February 22, 2011. REUTERS/Mark Blinch</p>

Financial shares shed 1.3 percent and led the market lower. Bank of Montreal, Canada’s fourth largest bank, was the most heavily weighted decliner, falling 3.5 percent to C$57.74 after reporting quarterly results that missed analysts’ expectations.

“They’ve disappointed on their earnings where most of the other banks have impressed,” said Julie Brough, vice president at Morgan Meighen & Associates.

BMO is the first Canadian bank this quarter to miss consensus estimates, though shares of the other banks have hardly benefited from their strong performances due to a murky 2012 outlook and the European debt crisis.

Elsewhere in the sector, Bank of Nova Scotia (BNS.TO) dropped 0.9 percent to C$47.89, while Royal Bank of Canada (RY.TO) fell 1.6 percent to C$48.50.

The Toronto Stock Exchange’s S&P/TSX composite index ended the day down 38.08 points, or 0.31 percent, at 12,081.25. Eight of its 10 sectors were lower.

Uncertainty about developments in the euro zone continued to pressure the market. Standard & Poor’s fired its second warning shot in 24 hours at the euro zone, threatening on Tuesday to cut the credit rating on its financial rescue fund as European leaders raced to find a political solution to the debt crisis.

The index crept into positive territory briefly at mid-afternoon, largely on the back of its commodity-linked materials sector, which ended the day 1.6 percent higher.

“I think the market is calculating that the perceived fiscal progress in the euro zone will lead to greater action from the ECB (European Central Bank),” said Fergal Smith, managing market strategist at Action Economics. “That would be very bullish for stocks. That’s providing resilience for stocks.”

The ECB is expected to cut interest rates and offer ultra-long liquidity operations to support banks when it meets on Thursday.

The market could trade flat ahead of a European Union summit scheduled for later this week, Brough said.

“I think investors are just cautious right now on putting too much weight on any news flow,” she said. “There’s just a little bit more cynicism to some degree about what any of it means and a little more reluctance to act on any piece of news.”

In company news, Quadra FNX Mining QUX.TO said it has agreed to be acquired by Polish mining company KGHM KGHM.WA for about C$3 billion. Quadra FNX soared 39.9 percent to C$15.88.

The blue chip S&P/TSX 60 index .TSE60 closed 3.79 points lower, or 0.55 percent, at 684.84.

($1=$1.01 Canadian)

Editing by Jeffrey Hodgson and Peter Galloway

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