July 31, 2012 / 4:43 PM / 7 years ago

CANADA STOCKS-TSX slides as stimulus hopes dim; Rona caps losses

* TSX down 50.32 pts, or 0.4 pct, at 11,707.56
    * Energy shares falls with commodities prices
    * U.S. data dims Fed stimulus hopes
    * Rona Inc up 19 pct after takeover bid

    By Jon Cook
    TORONTO, July 31 (Reuters) - Canada's main stock index fell
on Tuesday as a drop in commodities prices dragged down energy
and mining shares after U.S. economic data dimmed hopes that the
Federal Reserve would announce new stimulus measures at its
policy meeting this week.
    A more than 19 percent surge in the shares of
home-improvement retailer Rona Inc after a takeover bid
from a U.S. rival helped limit losses.
    Equities have rallied recently on expectations that the U.S.
Federal Reserve and the European Central Bank would announce new
measures to stimulate growth at their policy meetings this week.
The Fed begins its two-day meeting on Tuesday, and the ECB will
meet on Thursday. 
    But better-than-expected U.S. housing and manufacturing data
on Tuesday helped lower expectations the Fed would announce new
stimulus plans when it issues its policy statement on Wednesday.
Single-family home prices rose for the fourth month in a row in
May, and the pace of business activity in the U.S. Midwest
picked up in July.  
    However, government data on Tuesday showed spending by
American consumers fell in June for the first time in nearly a
    "The numbers are not good enough to dance from the rooftops
and they're not bad enough for full-scale,
all-hands-on-deck-type money printing," said Barry Schwartz,
vice president and portfolio manager at Baskin Financial
    Brokers and traders also cited pressure from news that
Germany's Finance Ministry reiterated its view that there is no
need to grant a banking license to the euro zone's new bailout
fund. Such a move could enable the fund to buy large amounts of
debt issued by troubled euro zone economies.    
    Around noon (1600 GMT), the Toronto Stock Exchange's S&P/TSX
composite index was down 50.32 points, or 0.4 percent,
at 11,707.56. 
    Losses were led by the powerhouse energy sector, which slid
1.2 percent as U.S. oil prices retreated from earlier gains on
the reduced prospects of more Fed easing. 
    The biggest decliners included Enbridge Inc, which
fell 2.2 percent to C$40.89, Cenovus Energy, down 1.8
percent to C$30.59, and Suncor Energy, down 1.5 percent
to C$30.92.
    "It's remarkable how oversold and unloved the commodities
sector is," said Schwartz.
    Heavily weighted materials, which includes miners, sank 0.8
percent. Potash Corp fell 1 percent to C$44.55, while
top gold miner Barrick Gold edged down 0.6 percent to
    On a positive note for resource companies, shares of Inmet
Mining Corp rose 5 percent to C$40 a day after the
Canadian base metal miner reported a 74 percent increase in
second-quarter profit. 
    Rona also helped limit losses. Shares of the struggling
Canadian retailer were up more than 19 percent at C$14.16 after
the company rejected American rival Lowe's Cos Inc's 
C$1.8-billion ($1.8 billion) bid. 
    "This is a takeover that has been talked about ever since
Lowe's stepped into Canada many years ago," said Schwartz. "Any
investor who has bought Rona's stock over the past couple years
has got their head handed to them. My mind is boggled as to why
Rona is not accepting the deal."
    Boucherville, Quebec-based Rona has struggled as Home Depot
 and Lowe's have made inroads into its home turf.
    Canadian financial shares were flat as banks were still
optimistic that ECB President Mario Draghi could announce at the
bank's Thursday meeting plans to lower Spanish and Italian
borrowing costs by buying those countries' bonds.
    Bank of Nova Scotia led gains, rising 0.6 percent
to C$52.55. Sun Life Financial shares climbed 1.1
percent to C$21.76. The Canadian life insurer is due to report
second-quarter results next week.
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