A combination of sliding oil prices, a record-breaking loss at Royal Bank of Scotland and indications of a deeper-than-expected slowdown in Europe kept the Toronto stock market negative Monday.
The S&P/TSX composite index pulled back 37.4 points to 8,883 after increasing worries about big losses in the financial sector helped trim the TSX by almost 2% last week.
Investor sentiment was negative as the European Union said it is facing a "deep and protracted recession" as a consequence of the world financial crisis.
The economies of the 16 countries that use the euro will shrink by 1.9% in 2009, with the entire EU contracting 1.8%.
Meanwhile, European Central Bank president Jean-Claude Trichet says global economic growth this year will be "substantially below" forecasts made only about a month ago.
Trichet says "world and European growth in 2009 will be substantially below the forecasts made at the beginning of December."
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Seven of the 13 TSX sub-groups were down, energy off the most, by 1.6%. Financials were down nearly a full percentage point, while gold slipped 0.9%. Gainers were powered by telecoms, up nearly 2%, followed by information technology, ahead 1.7%, and metals and mining, which gained 1.3%.
The TSX Venture Exchange added 4.36 points to 870.01, while the NASDAQ Canada index gained 17.15 points to 511.27
A day before the Bank of Canada was widely expected to cut its main interest rate half a point to 1%, the Canadian dollar fell 0.0038 of a cent to 79.99 cents U.S.
The federal government announced moves to loosen credit, Industry Minister Tony Clement saying the federal government will invest $350 million in the Business Development Bank to ease credit conditions for auto supply companies and other small and medium-sized businesses.
EnCana Corp. declined $1.30 to C$55.43 while Canadian Natural Resources lost 65 cents to $47.89.
Suncor Inc., which releases quarterly earnings tomorrow, was down $1.07 to $26.41.
Shares in industrial waste management services provider Newalta Inc. added 11 cents to $5.91 after it said its capital expenditure in the first half of 2009 will be $15 million, compared with $125 million in all of 2008. Newalta is heavily dependent on the oil and gas industry in Western Canada.
The financial sector was weighed down by Royal Bank of Scotland, which said that its losses for last year could reach 28 billion pounds or US$41.3 billion – the biggest ever for a British corporation.
The bank said profits in retail and commercial business in Britain had been wiped out by losses in its global banking and markets division.
Also, the British government revealed a second bailout plan for its ailing banks. The new plan would require banks to identify their riskiest assets and would allow them to pay a fee to insure them with the government. By offering to insure bank loans, the government is exposing taxpayers to billions of pounds of potential losses.
On the TSX, TD Bank dropped $1.11 to $42.59 while Royal Bank slid $1.08 to $32.56.
Signs of the gold sector’s weakness: the February bullion contract in New York dipped $4.40 to US$835.50. Barrick Gold Corp. faded 80 cents to $41.90.
Telecoms were led higher by Telus Corp., which plowed ahead 1.32 to $36.62 while Rogers Communications advanced 74 cents to $34.29.
Bombardier Inc. shares advanced four cents to $4.77 after it said its transportation division will continue to operate the Las Vegas monorail that shuttles passengers along the east side of the city's famed strip. Its Berlin-based railway equipment division has received a five-year option order from the Las Vegas Monorail Company valued at US$58 million.
Canadian National Railways, which reports earnings on Thursday, declined 63 cents to $41.90.
SFK Pulp Fund units retreated 22.5 cents or 31.2% to 49.5 cents after it suspended monthly distributions "until market conditions substantially improve." The company also extended quarterly maintenance shutdowns at two U.S. recycling mills by one and two weeks.
New York markets were closed for the Martin Luther King holiday while investors will be focused tomorrow on the inauguration of Barack Obama as the 44th president of the United States.
And there are high hopes that the new administration will boost investor confidence, at least in the short term, with details of huge stimulus package.
The New York Mercantile Exchange was closed for floor trading but in electronic trading the February crude contract, which expires Tuesday, declined $1.73 to US$34.78. The March contract gave back $1.74 to US$40.83 a barrel.
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