August 10, 2010 / 8:33 PM / 9 years ago

CANADA STOCKS-TSX cuts losses as Fed moves to firm recovery

* TSX down 25.27 points, or 0.21 percent, at 11,838.29

* Fed to reinvest maturing mortgage debt into Treasuries

* Eight of TSX’s 10 sectors lower (Updates to close, adds quote)

By Jennifer Kwan

TORONTO, Aug 10 (Reuters) - Toronto’s main stock index ended lower on Tuesday but trimmed losses after the U.S. Federal Reserve said it would reinvest maturing mortgage debt in government bonds to support economic recovery.

The resource-heavy Canadian index, which early in the day fell more than 100 points on soft economic data from the United States and China, rallied into positive territory briefly as the Fed move was seen as an effort to support a stalling U.S. economic recovery. [ID:nN09275781]

“The Fed is engaging in further monetary accommodation, which is supportive of the markets,” said Fergal Smith, managing market strategist at Action Economics.

Serge Pepin, head of investments at BMO Investments Inc, said there had been “anxiety as to was the Fed prepared to revive the quantitative easing.”

“The fact that it didn’t, the fact that it is still sort of holding off to see if there’s anything way more negative in the economy gave optimism to investors ... that the recovery is still on track; perhaps that the slowdown and the economic recovery is not as dire as perhaps anticipated,” he said.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE finished the day down 25.27 points, or 0.21 percent, at 11,838.29, with eight of its 10 sectors lower.

Declining stocks included Royal Bank of Canada (RY.TO), down 0.2 percent at C$53.35; Canadian Natural Resources, down 2 percent at C$36.13; and Teck Resources TCKb.TO, which fell 0.7 percent to C$36.06.

The index’s three key sectors — energy, financial and materials — fell as data showed U.S. business productivity fell for the first time in 1-1/2 years in the second quarter, underlining the soft recovery. [ID:nN10131732]

As well, China reported much slower than expected growth in July imports, signaling slowing domestic demand. [ID:nTOE67904G]

$1=$1.03 Canadian Reporting by Jennifer Kwan; editing by Peter Galloway

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