TSX falls as Moody's downgrades banks, Aimia plunges

TORONTO (Reuters) - Canada's main stock index fell on Thursday, as a Moody's downgrade of Canadian banks struck financials, and frequent-flyer points operator Aimia Inc AIM.TO plunged on news its program would be dropped by the country's largest airline.

FILE PHOTO - A TMX Group sign, the company that runs the Toronto Stock Exchange (TSX), is seen in Toronto, June 23, 2014. REUTERS/Mark Blinch/File Photo

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE posted a record high in February but has since pulled back 2.3 percent, pressured by depressed oil prices, a more uncertain outlook for Canada's exports to the United States and investor wariness about how troubles at an alternative mortgage lender could impact the country's red-hot housing market.

“The money flow shows you the way,” said Diana Avigdor, head of trading at Barometer Capital Management.

Avigdor is bullish on stocks but has cut her exposure to Canada in favor of the U.S. as some of the most heavily weighted groups on the TSX, such as financials, began to lose momentum.

Financial stocks fell to a five-month low, down 0.8 percent, after Moody’s Investor Service cut the long-term ratings for Canada’s six biggest banks, citing the rise in private-sector debt and unchecked house price appreciation.

Canadian Imperial Bank of Commerce CM.TO fell 1.3 percent to C$107.33, while National Bank of Canada NA.TO declined 2.3 percent to C$52.91.

Canada's largest pipeline company, Enbridge Inc ENB.TO, was by far the most influential mover on the downside, however, sliding 2.0 percent to C$54.80 after it reported a lower-than-expected quarterly profit.

The overall energy group fell 0.7 percent even as U.S. crude oil prices rose.

The TSX closed down 82.66 points, or 0.53 percent, at 15,550.55. Eight of the index’s 10 main sectors ended lower.

Shares in Air Canada AC.TO jumped 9.0 percent to C$16.23 after announcing it would start its own frequent-flyer program to replace Aeroplan, operated by Aimia.

Aimia stock sunk 59.4 percent to C$3.63 on the news. But losses for the consumer discretionary group were offset by a 5.5 percent jump to C$61.58 by Magna International Inc MG.TO, after the autoparts maker posted a quarterly profit that beat estimates.

Home Capital Group HCG.TO is in talks to divest about C$2 billion in assets, according to people familiar with the situation. The shares of Canada's biggest non-bank lender surged 23.4 percent to C$10.81.

Shares of Bombardier Inc BBDb.TO rose 7.8 percent to C$2.21 after the company reported better-than-expected quarterly results and said that its executive chairman is giving up management responsibilities after an outcry over compensation.

The materials group added 1.2 percent as metal prices climbed.

Additional reporting by Solarina Ho; Editing by W Simon and Sandra Maler