Concerns that Greece could be heading towards bankruptcy as early as next month cast a shadow over global commodity prices and acted as a drag on the Toronto stock market Monday.
The resource-heavy S&P/TSX composite index edged 17.44 points lower to 12,559.85 while the TSX Venture Exchange was off 0.89 of a point to 1,664.22.
The Canadian dollar backed off as investors moved to the safe-haven status of U.S. Treasuries and commodity prices weakened, losing 0.19 of a cent to 100.45 cents US.
U.S. markets were negative as the Dow Jones industrial average lost 17.1 points to 12,845.13. The Nasdaq composite index fell 3.67 points to 2,901.99 while the S&P 500 index moved down 0.57 of a point to 1,344.33.
Greece needs a second bailout amounting to €130 billion to avoid bankruptcy next month. But Greek party leaders have been unable to agree to the new measures, missing multiple deadlines in the negotiations, and delayed their latest meeting to Tuesday.
The parties all publicly oppose steep cuts in private sector pay demanded by the eurozone and IMF, but their backing is needed for the government to reach a deal for the bailout, which must be approved by the Greek Parliament.
Greece cannot cover a €14.5-billion bond repayment due March 20 without the second bailout.
Markets have been sensitive to the Greek debt crisis since a default would cause havoc in the region’s financial system.
“For a country of relatively few people in the grand scheme of things, not a significant size of economy, it sure has been in the headlines,” said Garey Aitken, director of equity research at Bissett Investment Management in Calgary.
He added that he doesn’t think the European debt crisis is going away any time soon and observed that even if there was a resolution to the Greek debt issue tomorrow, “then later this week we would probably be talking about refinancing issues with Italy or Spain.”
“It’s one hurdle or disappointment after another and… there is so much hope and comments that are viewed as positive but when you get to the detail and the actual implementation and execution, there’s been very little of that coming out of Europe.”
A stronger U.S. dollar helped depress commodity prices, as oil and metals are denominated in dollars which makes commodities more expensive for holders of other currencies.
The base metals sector lost 1.35% as March copper slipped four cents to US$3.86 a pound. Teck Resources (TSX:TCK.B) gave back 90 cents to C$42.50 and First Quantum Minerals (TSX:FM) fell 79 cents to $22.64.
The energy sector slipped 0.11% as the March crude contract on the New York Mercantile Exchange lost 93 cents to US$96.91 a barrel. Canadian Natural Resources (TSX:CNQ) declined 56 cents to C$40.28 and Cenovus Energy (TSX:CVE) gave back 69 cents to $38.11.
The tech sector was also a weight with Research In Motion Ltd. (TSX:RIM) down 25 cents to $16.53.
The industrials sector was mainly lower but Canadian Pacific (TSX:CP) gained 87 cents to $74.34 as the railway’s biggest shareholder, Pershing Square Capital, held a meeting in Toronto to get fellow shareholders on board with its plan to turn the company around. Among other things, Pershing Square wants to replace current CEO Fred Green with Hunter Harrison, the former boss of rival Canadian National Railway Ltd. who staged a turnaround at CN, making it the most successful railroad in North America.
The gold sector slipped about 0.25% as bullion prices also softened with the April contract down $15.40 to US$1,724.90 an ounce. But Barrick Gold Corp. (TSX:ABX) added 31 cents to C$48.90.
Commodity prices were lifted across the board Friday after the U.S. non-farm payrolls report for January showed that job creation came in much better than expected. The economy cranked out 243,000 jobs against the approximately 140,000 that economists expected.
The data also helped lift the TSX 0.9% last week, its seventh straight week of advances. The TSX is up just over five per cent from the start of the year as economic data from the U.S. that the country will avoid slipping back into recession.
In earnings news, quarterly profits at toymaker Hasbro Inc. slipped one per cent, pinched by softer-than-expected demand in the U.S. and Canada and slow sales of games and puzzles. Its shares shook off early losses and climbed 80 cents to US$36.66.
Elsewhere on the corporate front, Canadian airlines say they saw record passenger load factors for January. WestJet (TSX:WJA) said its traffic improved to 79.9%, compared to 77.8% in the year-earlier. Air Canada (TSX:AC.B) said its load factor was 79.1%, up from 78%. Porter Airlines reported its load factor grew four points to 55.7%. Air Canada shares rose five cents to $1.41 while WestJet slipped 18 cents to $13.41.
Pulp producer Fibrek Inc. (TSX:FBK) says an analysis by an independent firm estimates the value of the company to be between $162.6 million and $188.6 million. That is above the hostile bid of $130 million made by Resolute Forest Products (TSX:ABH), formerly AbitibiBowater. Fibrek shares rose five cents to $1.08.