Economic worries send TSX, oil prices down

The Canadian dollar was up 0.17 of a cent to 100.68 cents US after the Bank of Canada announced it is leaving its key interest rate unchanged at one per cent, a reflection of economic weakness across the globe.

Traders also took in quarterly and annual earnings from the Bank of Montreal (TSX:BMO) that beat estimates.

BMO had a fourth-quarter profit of $1.08-billion, up 41% from a year ago.

The bank’s adjusted earnings amounted to $1.65 per share, beating estimates by 22 cents a share. The quarter brought Bank of Montreal’s total net income for the 2012 financial year to $4.19 billion, up 35% from last year and its shares added 34 cents to $59.63.

U.S. indexes were lower with the Dow Jones industrials down 13.82 points to 12,951.78, the Nasdaq was 5.51 points lower to 2,996.69 while the S&P 500 index lost 2.41 points to 1,407.05.

Market attention has focused almost exclusively on heading off the automatic big spending cuts and significant tax increases that are to be imposed at the beginning of 2013. The worry is that the combination would dramatically slow the U.S. economy and likely push it over a “fiscal cliff” and back into recession.

Traders were unimpressed with a late day development Monday that saw Republicans put forward a proposal calling for raising the eligibility age for Medicare, lowering cost-of-living hikes for Social Security benefits and bringing in $800 billion in higher tax revenue.

The plan relies more on politically-sensitive spending cuts and would raise half the $1.6 trillion in revenue proposed by President Barack Obama over the coming decade. But it would keep the Bush-era tax cuts, including those for wealthier earners. Obama has said tax hikes for the very wealthy are a must.

“There’s obviously much gamesmanship going on at the political level,” said Jim Muir, director at Fraser, Mackenzie.

“You believe that they both want some sort of solution but I guess they’re going to read how the wind is blowing and see who is going to give a little. Each has a constituency and they don’t want to be seen up front as giving away.”

The energy sector led decliners, down 1.12% as worries about economic weakness stemming from a worrisome U.S. manufacturing report released Monday sent oil prices lower with the January crude contract on the New York Mercantile Exchange down 59 cents to US$88.50 a barrel and the energy sector was down 0.54%. Imperial Oil (TSX:IMO) was down 52 cents to C$42.31.

Canadian Natural Resources Ltd. (TSX:CNQ) fell 76 cents to $27.43 after it said it has set a 2013 capital budget of $6.9 billion, which is about $500 million more than the Calgary-based energy company’s capital spending this year. The biggest increase is at CNQ’s Horizon oilsands mining project, which will see its budget rise to $2.55 billion next year from $1.68 billion in 2012.

The tech sector fell 0.69% as CGI Group (TSX:GIB.A) lost 35 cents to $22.97.

@page_break@ Celestica Inc. (TSX:CLS) rose 11 cents to $7.35. The Toronto-based global manufacturing services company says it expects to pay US$7.80 per share to buy back about 22.4 million shares, or about 12% of its outstanding stock. The buyback price was determined by a bidding process known as a modified Dutch auction.

The base metals group was off 0.22% while March copper prices gave up a two-cent climb to close unchanged at US$3.66 a pound. The metal had earlier benefited for a second day on a strong Chinese manufacturing report. China, the world’s second-biggest economy, is the largest consumer of the metal. Turquoise Hill Resources (TSX:TRQ) moved 19 cents lower to $7.16.

Telecoms were also weak as Telus Corp. (TSX:T) fell 46 cents to $64.35.

The gold sector was flat as bullion for February closed at a one-month low below the psychologically important US$1,700 mark, losing $25.30 to US$1,695.80 an ounce. Goldcorp Inc. (TSX:G) was ahead 56 cents to $37.85 while Iamgold (TSX:IMG) faded 18 cents to $11.44.

Among stocks making big moves, shares in pipeline company ShawCor Ltd. (TSX: SCL.A) tumbled 14% to $39.47, a day after it announced a strategic review revealed that an acceptable buyout offer is “highly unlikely” in the current market. However, it added that it will continue to review and consider a range of strategic alternatives, but said it could give no assurance any particular transaction would take place.

In New York, Darden Restaurants fell 9.58% to US$47.40 after the owner of the Olive Garden, Red Lobster and LongHorn Steakhouse restaurant chains revised its earnings outlook for fiscal 2013. Separately, analysts at Credit Suisse said that restaurant goers would “quickly lose their appetite,” if the U.S. went over the “cliff,” because the job cuts that would likely follow would curb discretionary spending.

Meanwhile, talks between the 27 European Union finance ministers got under way in Brussels.

They hope to agree on the set-up of a new supervisory body, which will be headed by the European Central Bank and will hold wide-ranging authority over banks.

But Germany and France, the continent’s two largest economic powers, disagree on how many banks the ECB should be allowed to oversee, when it should start, and what its final powers should be.