August 10, 2010 / 7:53 PM / 9 years ago

CANADA STOCKS-TSX trims losses after U.S. Fed statement

* TSX down 23.67 points, or 0.2 percent, at 11,839.89

* Fed to reinvest maturing mortgage debt into Treasuries (Updates to midafternoon, adds quote)

By Jennifer Kwan

TORONTO, Aug 10 (Reuters) - Toronto’s main stock index pared losses on Tuesday after the Federal Reserve said it would begin funneling proceeds from its maturing mortgage bonds to buy more government debt.

The decision to reinvest proceeds from the more than $1.3 trillion in mortgage-related debt the Fed holds, an effort to keep market-set borrowing costs down, represents a significant policy shift. [ID:nN09275781]

The resource-heavy Canadian index, which earlier fell more than 100 points, rallied into positive territory after the move seen as an effort to support a stalling U.S. economic recovery.

“It also did pare down it’s near term outlook for the economy, but perhaps it wasn’t as bad as anticipated. I think that gave optimism to the Street and that’s why we saw a bit of a pop up in prices,” said Serge Pepin, head of investments at BMO Investments Inc.

At 3:37 p.m. (1937 GMT), the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 23.67 points, or 0.2 percent, at 11,839.89.

Eight of the index’s 10 sectors were lower. Declining stocks included Royal Bank of Canada (RY.TO), down 0.2 percent at C$53.33, Canadian Natural Resources, down 1.9 percent at C$36.16, and Teck Resources TCKb.TO, which fell 0.5 percent to C$36.13.

$1=$1.03 Canadian Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson

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