Financials, resource stocks take TSX lower

There was relief over more progress toward strengthening a financial rescue fund aimed at shoring up Europe’s banks. Slovakia’s parliament approved a measure that would release large amounts of money to European banks and governments before a full-blown crisis sets in. Slovakia had blocked the bill Tuesday, becoming the only one of the 17 countries that use the euro to do so.

The TSX Venture Exchange was 10.14 points lower at 1,532.63.

China’s exports were 17.1% higher in September than in the same month a year earlier, but that was down from a 24.5% year-over-year gain in August. Customs data showed that import growth also fell.

The strong Chinese economy has done much to support a shaky global economic recovery and equity and commodity markets usually react negatively to any sign of a slowdown. This is especially so for the TSX, which is heavily weighted in oil and mining stocks.

“Right now, we are overly acute to negative news because of consumer confidence being so low,” said Pat McHugh, senior portfolio manager at Manulife Asset Management, adding that if the same data from China came in two years ago “I don’t think it really would have mattered.”

“If it was two years from now I don’t think it’s going to really matter. But right now, yeah (it matters).”

The soft Chinese data helped depress the Canadian dollar. But the loonie was also well off early lows, down 0.23 of a cent to 98.07 cents US at mid-afternoon after earlier tumbling as much as 0.9 of a cent.

A poorly-received earnings report from banking giant JPMorgan Chase also pressured U.S. markets as the Dow Jones industrials lost 40.72 points to 11,478.13. The Nasdaq composite index was up 15.51 points to 2,620.24 while the S&P 500 index declined 3.59 points to 1,203.66.

J.P. Morgan Chase’s shares were down 4.82% to US$31.60 after the bank reported that third-quarter income fell four per cent and it set aside $1 billion for litigation tied to poorly-written mortgage loans and securities.

J.P. Morgan Chase earned US$4.3 billion, or $1.02 per share, beating estimates by 11 cents a share.

The financial sector led TSX losses, down 1.41% as Royal Bank (TSX:RY) lost $1.01 to $ while TD Bank (TSX:TD) fell 58 cents to $74.62.

The TSX energy sector fell 0.61% as demand concerns pushed the November crude contract on the New York Mercantile Exchange down $1.34 to US$84.23 a barrel. Suncor Energy (TSX:SU) lost 47 cents to C$29.14 and Cenovus Energy (TSX:CVE) fell 55 cents to C$34.26.

The base metals sector lost 2.37% as copper prices also lost ground. The December contract on the Nymex fell nine cents to US$3.31 a pound. Teck Resources (TSX:TCK.B) gave back 59 cents to C$35.44 and First Quantum Minerals (TSX:FM) dropped 73 cents to C$16.48.

The gold sector was also weak as bullion also headed lower, down $14.10 to US$1,668.50 an ounce. Barrick Gold Corp. (TSX:ABX) weakened by 98 cents to C$48 and Goldcorp Inc. (TSX:G) faded 75 cents to C$47.90.

Elsewhere in the group, NovaGold Resources Inc. (TSX:NG) shares gained three cents to $7.54 as the miner reported third-quarter net loss of $56.5 million or 24 cents per share compared with a net loss of $147.6 million 66 cents per share in the corresponding 2010 period. The exploration and development company did not report any revenues for the quarter.

The tech sector was the biggest advancer, up 1.19% as MacDonald Dettwiler & Assoc. (TSX:MDA) ran up $1.33 to $44.44.

But Research in Motion Ltd. (TSX:RIM) shares gave back 15 cents to $24.12 as the BlackBerry maker said email and texting services were back to normal. Co-CEO Mike Lazaridis also again apologized for an outage that started Monday and affected millions of customers around the world.

Stock markets have risen sharply this week as eurozone officials have finally indicated a willingness to take decisive action such as larger writedowns on Greek debt and a push to make banks strengthen their capital against resulting losses.

“It isn’t so much tackling the debt crisis mess as opposed to just dealing with the banks,” added McHugh.

“Greece is in default, Greece is going to default, it’s only a question of when. I think they’re trying to keep the patient alive.”

New steps to quell the debt crisis are seen as positive for stocks because a disorderly default by Greece and big losses to banks on their government bonds could cause a banking crisis, choking off credit to the wider economy and causing a recession.

But traders are anxious for eurozone leaders to unveil details. And they likely won’t find out more until a European summit 10 days from now, which will be followed by a Group of 20 summit of rich and developing countries in early November.

In other corporate news, Air Canada (TSX:AC.B) shares slipped two cents to $1.37 as the carrier said its flights are operating on schedule after the federal labour minister blocked a planned strike by flight attendants just hours before it was set to begin.

Shares in Magna International Inc. (TSX:MG) were down $1.78 to $37.18 after the Canadian auto parts giant said it was being investigated by the U.S. Justice Department on an antitrust matter in the auto tooling industry. The company said it was co-operating in the investigation, which centres on tooling contract bids by its Cosma International unit.