December 28, 2011 / 1:37 PM / in 6 years

TSX posts steepest loss in 2 weeks as commodities

TORONTO (Reuters) - Toronto’s main stock index tumbled nearly 200 points on Wednesday, its biggest drop in two weeks, as mining and energy shares were hit by a stronger U.S. dollar and weaker commodity prices.

Trading was thin after a two-day Christmas holiday and that may have exaggerated the index’s move.

A safe-haven rally in the U.S. dollar <FRX/> on a spike in European debt jitters and worries about the fate of the global economy in 2012 pressured greenback-priced commodities, including oil, gold, silver and base metals, which in turn hit Canadian resource-related shares.

The index’s mining-heavy materials group sank 4.2 percent.

Among the weightiest decliners, Goldcorp (G.TO) dropped 4.7 percent to C$43.56, Barrick Gold Corp (ABX.TO) lost 3.6 percent to C$45.26, and Potash Corp (POT.TO) was down 3.6 percent at C$41.90.

”The European situation is not anywhere close to being solved and it’s going to require a lot of moves by governments and banks,“ said Sal Masionis, stockbroker at Brant Securities. ”The problem is when you have 17 countries that have to agree to things, it will take ages, and meanwhile markets don’t wait for governments.

“The tax loss selling is over in Canada ... but there are very few bids around on the buy side. It’s a very illiquid market and when you have people dumping, it certainly is not very good.”

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended down 198.26 points, or 1.66 percent, at 11,728.41. Eight of the index’s 10 sectors were weaker, including financials, which were down 0.8 percent.

The drop came after a 2.5 percent gain last week, but the TSX is down nearly 13 percent for the year.

“Really the only things that are left (in the year-end market) are the hedge funds making sure that they’re in good shape for year-end and a lot of them have to sell to cover their losses,” said John Kinsey, portfolio manager at Caldwell Securities.

“The other part of it is the window-dressing,” he said. “This is the most important quarter for window-dressing because it’s obviously the end of the year for most mutual funds and other corporations and so they all . sell their losers and that puts pressure on the market.”

Sears Canada SCC.TO slid 10 percent to C$10.40 after parent company Sears Holdings Corp (SHLD.O) said it would close as many as 120 Kmart and Sears stores in the United States.

Among the advancers, Research In Motion RIM.TO jumped 3.1 percent to C$14.64, lifting the technology group slightly. Healthcare stocks were also firmer.

The BlackBerry maker said on Wednesday it has slashed prices on its PlayBook tablet in India in a move aimed at boosting dismal sales for a device that was briefly considered a potential threat to Apple’s (AAPL.O) iPad.

Bombardier (BBDb.TO) climbed 1 percent to C$3.90 after the train maker was awarded a 189-million-pound ($296 million) contract to supply 130 carriages to British rail operator Southern.

Reporting By Claire Sibonney; Editing by Peter Galloway

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