The Toronto stock market was lower Tuesday, with sentiment on commodity demand dampened by a report showing that Chinese manufacturing slowed in May and persistent concerns about the euro-zone economy.
The S&P TSX Composite Index fell 191.02 points, or 1.6%, to 11,571.97
Investors also took in a widely-expected quarter-point hike in the Bank of Canada’s key interest rate to 0.5%. The Canadian dollar fell back despite the rate hike, pushed lower by uncertainty over what the central bank will do about raising rates in the future.
The central bank said that economic conditions around the world are uneven and acknowledged there’s "the possibility of renewed weakness in Europe," adding that "the required rebalancing of global growth has not yet materialized."
One of the bright spots on the TSX was Scotiabank, which turned in a record profit of nearly $1.1 billion or $1.02 a share, beating analyst estimates for about 93 cents per share. Earnings were up sharply from $225 million a year ago. The bank’s provision for credit losses was reduced to $338 million, down $151 million from the same time last year. Its shares rose $1.26 to $49.51.
Worries about Chinese growth were in focus after surveys showed that growth in the country’s manufacturing sector had slowed. The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index fell to 53.9 in May from 55.7 in April and 55.1 in March due to lacklustre demand both at home and abroad.
Strong Chinese growth has helped lead the global economy out of recession and has been particularly beneficial to the resource-heavy Toronto stock market because of heavy demand for oil and metals.
The base metals segment was the leading decliner as July copper in New York was off early lows but still three cents lower to $3.08 U.S. a pound.
Commodity prices were lower earlier in the session as ongoing concerns about the European debt crisis pushed the euro to a new four-year low of $1.2112 U.S. before rising to $1.2293 U.S. The euro has been seen as an indication for confidence in whether countries like Greece, Spain and Portugal will be able to cut spending to contain mounting debt without stalling a recovery.
Teck Resources fell $2.59, or 7.1%, to $33.95 while Quadra FNX Mining fell $1.37, or 9.3%, to $13.33.
Copper prices and mining stocks have suffered over the past month, with the metal falling almost 8% during May and the base metals sector down 11.5% on worries about an economic rebound and falling demand.
The energy sector fell even as the July crude contract on the New York Mercantile Exchange shed early losses to inch nine cents higher to $74.06 U.S. a barrel. Canadian Natural Resources dropped $2.10 to $35.15 while Imperial Oil was down 91 cents to $39.59.
The industrials sector moved down as transportation giant Bombardier Inc. lost 24 cents to $4.61.
Among gold stocks, Barrick Gold Corp. improved by 77 cents to $44.92.
Telecoms also supported the TSX with BCE Inc. ahead 56 cents to $31.26 and Telus Corp. up 24 cents to $38.87.
Anaconda Mining Inc. shares surged 4.5 cents or 16.4% to 32 cents after it struck a deal to acquire interests in two significant iron exploration portfolios from a private Chilean company, Inversiones SBX Limitada.
WestJet Airlines Ltd. is close to forging a new partnership with a U.S. airline as it seeks to draw more international traffic into its network. The Calgary-based airline’s CEO says the company is "just on the verge" of being able to announce something on that front, but can’t provide any details yet. WestJet shares were off two cents to $11.83.
In economic news, Bank of Canada hiked its target for the overnight rate by 0.25% to 0.50%. The bank rate was correspondingly raised to 0.75%, while deposit rate was kept at 0.25%. Economists were expecting the bank to raise its target rate for overnight loans between commercial banks to 0.50% from 0.25%
Yesterday, data from Statistics Canada revealed that the country's GDP grew 6.1% at an annualized pace in the first quarter 2010, beating economists expectations for a 5.9% expansion.
The Canadian dollar dropped 1.01 cents to 94.85 cents U.S.
ON BAYSTREET
All but two of the 14 TSX subgroups were lower on the day. Metals and mining took the worst hit, down 6%, global base metals were down 4.3% and energy fell 3.3%.
Gold was one of two gainers, up 0.4%. Telecoms were the other, eking out a 0.01% gain.
The TSX Venture Exchange faded 25.32 points to 1,488.25, while the Nasdaq Canada index moved 16.98 points lower to 673.79.
ON WALLSTREET
In New York, stocks slumped Tuesday, ending a choppy session lower, as worries about the global economic outlook overshadowed better-than-expected readings on the U.S. economy.
The Dow Jones industrial average dumped 112.61 points, or 1.1%, to 10,024.02.
The S&P 500 index remained behind 18.70 points to 1,070.71. The Nasdaq composite index plummeted 34.71 points to 2,222.23.
The market retreated in early trading after a report showed slower manufacturing growth in China and the euro briefly fell to a fresh four-year low. Better-than-expected readings on U.S. construction and manufacturing helped turn the tide in the morning. But the market sold off again heading into the close.
Stocks tumbled last month, with the Dow's decline of 7.9% its worst May performance since 1940. All financial markets were closed Monday for Memorial Day.
The pullback came as the euro plunged and the European debt crisis threatened to slow global growth. Worries about China's slowdown were also a factor.
BP shares plunged 15% as the company's latest attempt at stopping the oil spill -- now in its seventh week -- failed. The company had tried to stop the spill -- the worst in U.S. history --by forcing mud into the leaking well
Since the Deepwater Horizon exploded on April 20, the stock has lost more than one-third of its value.
AIG shares fell after the company rejected Prudential PLC's request to lower the price of its $35.5-billion U.S. deal to buy AIG's Asian affiliate, raising the chances of the deal falling apart.
On the upside, Apple shares gained after the company said Monday that it has sold its two-millionth iPad. Following the news, a number of analysts raised their estimates on iPad sales and Apple's quarterly and fiscal-year figures.
Hewlett-Packard announced it is cutting its total workforce by 3,000 over the next few years as it accelerates its use of automatic data centers for business customers. Shares of the Dow component gained 0.5%.
A variety of financial shares fell, lowering the KBW Bank sector index by 1.9%.
On the economic front, the Institute for Supply Management's May manufacturing index fell to 59.7 from 60.4. However, the index was expected to fall more, to 58.9, according to a consensus of economists surveyed by Briefing.com.
Any reading above 50 indicates expansion in the sector.
Construction spending rose 2.7% in April, trouncing expectations for a rise of 0.1%. The government reported construction spending rose 0.4% in March.
Treasury prices were flat, keeping the yield on the 10-year note at 3.30%.
The price of a barrel of oil eased $1.77 to $72.20 U.S.
Gold prices added $12 to $1,227 U.S. an ounce
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