The Toronto stock market was lower Tuesday with investors cautious amid weak earnings reports and a warning from the Bank of Canada of slowing economic conditions as it kept its key interest rate unchanged at one per cent.
There was also heightened uncertainty over what sort of plan will be unveiled Wednesday by eurozone leaders to deal with the region’s debt crisis.
The S&P/TSX composite index closed down 52.54 points to 12,109.75 as a big jump in bullion and gold stocks limited losses while the TSX Venture Exchange was up 5.12 points at 1,565.45.
The Bank of Canada said Tuesday the global economy is slowing and Europe may actually fall back into a brief recession. It added that Canada’s economy will have a tougher time getting back to full speed.
It estimated Canada’s economy will likely grow a modest 2.1% this year — most of it in the first quarter — and will fare even worse at 1.9% next year. Both numbers were 0.7 percentage points less than the bank had projected in July.
“It sends a signal that you aren’t getting a rate hike any time soon,” said Gareth Watson, vice-president investment management and research, Richardson GMP Ltd.
“Supposedly we’re doing better than everyone else, which maybe as a snapshot in time is true, but over the long-run (the economy) is going to follow the path of the big leaders.”
The Canadian dollar plunged following the bleak economic assessment by the central bank after earlier moving past parity with the U.S. dollar for the first time in five weeks.
The loonie was down 1.29 cents to 98.4 cents US after rising as high as 100.11 cents US.
New York markets tumbled as the Dow Jones industrial index fell 207 points to 11,706.62, the Nasdaq composite index dropped 61.02 points to 2,638.42 and the S&P 500 index declined 25.14 points to 1,229.05.
Uncertainty over the European debt crisis grew after officials decided that key parts of a package meant to deal comprehensively with the eurozone’s government debt crisis will not be ready in time for a leaders’ summit on Wednesday.
A meeting of European Union finance ministers, which was to be held just before the summit, was called off. A summit of EU and eurozone leaders planned for Wednesday evening will still be held, but its conclusions on the grand plan may remain vague without the technical work concluded.
It has been expected that among the measures, the 17-country eurozone was set to boost the powers of its bailout fund. German lawmakers said the fund’s lending capacity could reach more than C1 trillion.
The plan is also expected to lighten Greece’s debt load by having the country’s private bondholders agree to sharper losses. Meanwhile, ailing European banks will be asked to raise fresh capital to protect them against such losses.
“What the market has been absolutely dying for is details,” Watson said.
“They want specifics, they want numbers. They want to know if you’re a Greek bondholder what is the haircut you’re finally going to take so we can get Greece off the map and stop talking about them.”
Earnings misses included Canadian Pacific Railway Ltd. (TSX:CP), which said its net earnings were $186.8 million or $1.10 per share, missing analyst estimates by a penny as higher fuel prices and operating expenses offset stronger revenues. The railway’s revenue came in at US$1.34 billion, which met expectations. Its shares lost 31 cents to $59.52.
Shares in U.S. manufacturing conglomerate 3M fell 6.24% to US$77.05 as it lowered its earnings expectations for the year as slowing growth overseas continues to impact its business.
Buyers were also discouraged by data showing that consumer confidence in the U.S. economy fell in October to its lowest level since 2009 when the U.S. was in the middle of a deep recession.
The Conference Board says that its Consumer Confidence Index dropped more than six points to 39.8, down from a revised 46.4 in September.
The TSX found support from the gold sector as bullion prices advanced with the December gold contract up $48.10 to US$1,700.40 an ounce. The group gained about 3.5% as Barrick Gold Corp. (TSX:ABX) climbed $1.60 to US$48.05 while Goldcorp Inc. (TSX:G) improved by $1.90 to $48.34.
Oil prices charged ahead for a third day as markets grow more optimistic that European leaders are set to deliver a comprehensive plan to deal with the region’s debt crisis on Wednesday.
The December crude contract on the New York Mercantile Exchange was ahead $1.90 at US$93.17 a barrel. But the energy sector stepped back 1.64% as Suncor Energy (TSX:SU) declined 44 cents to C$31.14 while Talisman Energy (TSX:TLM) was down 35 cents at $13.79.
The base metals sector moved back 2.6% as copper prices stepped back, down three cents to US$3.42 a pound. Chinese manufacturing data helped send the metal 23 cents higher on Monday. China is the world’s biggest consumer of the metal.
Teck Resources (TSX:TCK.B) lost 98 cents to C$35.82 and First Quantum Minerals (TSX:FM) fell 60 cents to $17.23.
The financial sector declined 1.07% with Scotiabank (TSX:BNS) down 81 cents to $51.43.
Online investment broker TD Ameritrade says its fiscal fourth-quarter profit shot up 44% to US$163.7 million or 29 cents a share, missing estimates by two cents. Revenue came in at $703.5 million, which missed estimates of $713.6 million.
TD Bank, which owns a minority stake of the U.S. online broker, said it expects TD Ameritrade’s fourth-quarter earnings to translate into a contribution of C$54 million to the Canadian bank’s fiscal fourth-quarter net profits. TD (TSX:TD) shares fell $1.28 to $73.68.