The Toronto stock market headed for a negative start to the session Thursday amid the possibility of downgrades of some of the world’s biggest banks and doubts as to whether Greece will get the bailout money needed to head off bankruptcy.
The negative sentiment spread to commodity markets where prices for oil and metals backed off.
The Canadian dollar also declined as traders opted out of riskier investments such as commodity-based currencies and bought into the safe-haven status of U.S. Treasuries.
The loonie fell 0.46 of a cent to 99.63 cents US.
U.S. futures also dropped as the Dow Jones industrial futures lost 38 points to 12,725, the Nasdaq futures were down six points to 2,551.5 while the S&P 500 futures fell 6.4 points to 1,335.8.
Investors are gradually reassessing their assumption that Greece will get a bailout €130 billion and an accompanying €100 billion debt writedown by private bondholders.
Greece needs the money to deal with a huge bond repayment March 20 in order to avoid default, which would likely cause shockwaves through the financial system.
Greece has been forced to meet a growing list of demands to qualify for the bailout money. These included finding a further €325 million in savings and a commitment in writing by the leaders of Greece’s coalition government that they will stick to those requirements even after an election scheduled for April.
On Wednesday evening, after a lengthy conference call between the 17 eurozone finance ministers, more hurdles were put in front of Greece. One involves the possibility of setting up an account, separate from Greece’s general budget, that would be dedicated to paying off Greece’s massive debt.
Worries that Greece could default within a month spread to Spain and Italy, other heavily-indebted eurozone members. Nervous investors drove up bond yields in both countries Thursday.
Meanwhile, Moody’s Investors Service said it may lower the ratings of some of the world’s largest banks as well as those of some securities firms because their long-term prospects for profitability and growth are shrinking.
Some of the banks under review for downgrades include Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley.
The announcement comes just days after the ratings agency said that it was cutting the ratings of Italy, Portugal and Spain partly because of Europe’s weakening economy.
Commodity prices were lower across the board with the March crude contract on the New York Mercantile Exchange down 84 cents to US$100.96 a barrel.
The March copper contract declined seven cents to US$3.73 a pound and April bullion lost $11.90 to US$1,716.20 an ounce.
Investors also took in earnings from the resource sector Thursday morning.
Barrick Gold Corp. (TSX:ABX) said its adjusted net earnings grew 15% to US$1.17 billion or $1.17 a share in the fourth quarter on higher gold prices and copper sales. But the results still missed analyst expectations by 10 cents.
Nexen Inc. (TSX:NXY) saw its profit cut by nearly 75% in the latest quarter to $43 million as the big international oil and gas producer booked charges on its books for future oilsands projects and low natural gas prices.
On Tuesday, insurance giant Sun Life Financial Inc.(TSX:SLF) reported that it lost $525 million in the latest quarter as the company took some big charges on its books, including the cost of shuttering its individual products business in the U.S. Canada’s No. 3 insurer lost 90 cents a share, reversing a net profit of $504 million or 84 cents a year earlier.
European markets were well in the red with London’s FTSE 100 index down 0.73%, Frankfurt’s DAX declined 1.11% and the Paris CAC 40 was off 0.77%.
Earlier in Asia, Tokyo’s benchmark Nikkei 225 index shed 0.2%, Hong Kong’s Hang Seng was off 0.4% and Seoul’s Kospi fell 1.4%. China’s Shanghai Composite Index lost 0.4%.