Source: The Canadian Press

Commodity stocks led the way to a negative session on the Toronto stock market Monday while traders considered how bank stocks might be affected by moves by Ottawa to curb excessive borrowing on homes.

The S&P/TSX composite index declined 23.95 points to 13,440.11 while the TSX Venture Exchange gained 4.49 points to 2,275.45.

New York markets were closed for the Martin Luther King holiday.

The Canadian dollar was up 0.23 of a cent at 101.3 cents US a day before the Bank of Canada’s next announcement on interest rates.

The central bank is expected to leave its key rate unchanged at 1% on Tuesday.

But many economists expect the bank to resume rate hikes later this year and that’s a major reason why federal Finance Minister Jim Flaherty announced moves to tighten mortgage lending in a bid to reduce household debt levels.

Among other things, mortgage amortization periods will be reduced to 30 years from 35 years and the maximum amount Canadians can borrow to refinance their mortgages will be lowered to 85% from 90%.

“It’s hard to know if these measures are going to curtail mortgage markets,” said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier.

“One has to remember that each bank has different areas where they operate. It’s not a blanket statement that it’s going to hurt the whole banking system because each bank has multiple business lines.”

The financials sector was down slightly with CIBC (TSX:CM) off 36 cents at $78 while National Bank (TSX:NA) lost 30 cents to $70.64.

The base metals sector drifted 0.86% lower with the February copper contract on the New York Mercantile Exchange down three cents in electronic trading late in the afternoon at US$4.38 a pound. Equinox Minerals (TSX:EQN) declined 10 cents to C$5.76 while HudBay Minerals (TSX:HBM) lost 20 cents to $17.03.

The board of Baffinland Iron Mines Corp. (TSX:BIM) announced its support Monday for a joint takeover bid for the company by ArcelorMittal and a private equity fund that values the company at about $590 million. ArcelorMittal and Nunavut Iron Ore Acquisition had been in a takeover fight for Baffinland, but called a truce Friday with a joint bid. On Monday, Baffinland shares dipped four cents to $1.51.

Oil prices softened in the wake of China’s order on Friday to state-owned banks to set aside an additional 0.5% of deposits as reserves in order to curb inflation. It was the seventh time in a year that the reserve rate has been hiked.

The latest move to curb lending raises fears about demand for commodities.

The energy sector was down 0.41% as the February crude contract on the New York Mercantile Exchange declined 51 cents in electronic trading to US$91.03 a barrel. Imperial Oil (TSX:IMO) shed 39 cents to C$42.26 while Suncor Energy (TSX:SU) dropped 19 cents to $38.19.

Ivanhoe Energy Inc. (TSX:IE) has announced a second natural gas discovery in less than a month at its subsidiary Sunwing in southwest China. Its shares jumped 25 cents, or 8%, to $3.38.

Gold stocks advanced as bullion rose slightly with the February gold contract in New York up 70 cents at US$1,361.20 an ounce. Goldcorp Inc. (TSX:G) gained 30 cents to C$40.47 while Barrick Gold Corp. (TSX:ABX) climbed 29 cents to $46.88.

Tech stocks were higher as BlackBerry maker Research In Motion Ltd. (TSX:RIM) promised Indonesia it will meet the country’s request to filter out pornographic content on its smartphones, according to a government spokesman. RIM made a commitment last week to install the filters after Indonesia threatened to revoke BlackBerry’s licence to operate in the world’s most populous Muslim country. RIM shares climbed 75 cents to $64.93.

Traders also focused on European finance ministers meeting in Brussels to discuss how to tackle the government debt crisis. All eyes were on Germany to see if Europe’s largest economy and financier will resist boosting the size of the EU bailout fund.

Germany’s finance minister, Wolfgang Schaeuble, insisted Monday that bolstering the bailout fund so it can actually lend out its advertised 750 billion euros (US$1 trillion) — which it currently cannot do due to technical reasons — is as far as his country will go. Other countries had proposed doubling the size of the fund.

In other corporate news, Apple CEO Steve Jobs announced that he is taking a medical leave of absence so he can focus on his health.

Shares of Sun Gro Horticulture Inc. (TSX:GRO) were up 27.73% to $6.54 after IKO Enterprises Ltd. announced it plans to buy the peat moss producer in a deal that values the company at about $147 million. Calgary-based IKO announced late Sunday that it would pay $6.60 in cash for the company, formerly known as Sun Gro Horticulture Income Fund.

Shares in GASFRAC Energy Services Inc. (TSXV:GFS) tumbled 18.56% to $9.61 after the oil and gas service company curtailed operations following a propane leak and subsequent fire which destroyed two fracturing pumpers. The Calgary company’s primary business is providing liquid propane gas fracturing services to oil and gas companies.