The Toronto stock market fell sharply Monday, giving back a chunk of last week’s solid advance, amid a warning from Germany that investors shouldn’t get carried away on expectations for a coming European summit meeting.
The S&P/TSX composite index faded 158.69 points, or 1.3%, to end Monday at 11,923.04.
The Canadian dollar moved lower 1.09 cents to 97.88 cents U.S.
Finance ministers from the Group of 20 leading industrial and developing nations reiterated their belief during the weekend that Europe, in particular Germany and France, are thrashing out a comprehensive plan to stabilize the debt crisis.
Traders hoped that a program would be finalized at a European Union summit which concludes on Sunday, and then presented the following week at the G20 government leaders meeting.
But on Monday, German Chancellor Angela Merkel’s spokesman, Steffan Seibert, said the E.U. meeting is only an "important step" on a long road.
Seibert observed that Merkel was saying that renewed dreams of having everything solved and done with next month "will again not be fulfilled."
The base metals sector declined, as the December copper contract on the Nymex declined two cents to $3.39 U.S. a pound. Teck Resources fell $1.40 to $35.29 and Ivanhoe Mines gave back $1.28 to $17.15.
Mining giant Rio Tinto said Monday it will sell 13 of its aluminum assets worth about $8 billion, including refineries, smelters, power stations and a mine, as the world’s second biggest miner seeks to focus on its more profitable Canadian operations.
The financial sector was down amid a warning from Sun Life Financial that it will book a loss of $621 million in the third quarter due to "substantial declines" in both equity markets and interest rates. Canada’s third-largest insurer observed that equity markets were exceptionally volatile with North American markets dropping 12%-14% in the three months ended Sept. 30.
Sun Life shares fell $2.38 to $24.07.
Elsewhere in the sector, Manulife Financial lost 60 cents to $12.34.
The energy sector was down as Suncor Energy moved down 93 cents to $29.76.
The tech sector was also lower with Research In Motion shares down $1.36 to $22.90. The BlackBerry maker said Monday it will offer its individual subscribers a selection of premium apps for free and its corporate customers free support for a month to show appreciation for customers’ patience during the recent worldwide service disruptions.
The gold sector declined Barrick Gold Corp. faded 48 cents to $48.28.
Economically speaking, Statistics Canada reported this morning that foreign investment in Canadian securities fell to $7.9 billion in August, most of that in the Canadian bond market.
Elsewhere, the nation’s number crunchers told us that August new motor vehicles dipped 0.4% to 131,840 units, mostly due to a decrease in truck sales.
ON BAYSTREET
The TSX Venture Exchange dropped 16.12 points to 1,541.49 while the Nasdaq Canada index fell 16.12 points to 437.13
Ten of the 14 Toronto subgroups were negative on the day. Metals and mining stumbled 5%, global base metals were off 4.3% and information technology faltered 3.7%.
The four gainers were led by utilities, picking up 0.8%, telecoms, edging up 0.4%, and health-care, nosing up 0.1%.
ON WALLSTREET
In New York, stocks started the week with a steep selloff Monday, following last week's stellar gains, as worries about Europe's debt crisis dominated.
Mixed earnings reports from Citigroup and Wells Fargo and a disappointing report on regional manufacturing also dampened investor sentiment.
The Dow Jones Industrials collapsed 247.49 points, or 2.1%, to end the day at 11,397, with shares of Alcoa and Hewlett Packard falling the hardest.
The S&P 500 fell back 23.72 points to 1,200.86, while the Nasdaq Composite Index tripped 52.93 points to 2,614.92.
Over the weekend, finance ministers from the world's largest economies pledged to take "all necessary actions" to stabilize global financial markets and ensure that banks are well-capitalized.
Officials promised to have a comprehensive plan to secure the banking system and address Europe's sovereign debt problems in place by next Sunday, when the European Council meets in Brussels.
But early Monday, German Finance Minister Wolfgang Schaeuble tempered those expectations, saying that a final solution to Europe's debt crisis is unlikely to come out of the upcoming meeting.
As investors mull over the gloomy future, the market's fear gauge, the VIX, spiked 15% Monday to 32.48. Any reading above 30 signals investor worry.
While Europe will remain in focus on Wall Street, earnings news will give investors something else to chew on, and positive results and guidance from companies could help stocks break above the recent trading range, said one expert.
Monday's corporate news was mixed. Citigroup reported earnings and revenue that beat expectations, while Wells Fargo posted results that fell short of forecasts.
Pipeline operator Kinder Morgan announced Sunday that it is acquiring rival El Paso for $38 billion U.S. in cash, stock and assumed debt. The acquisition between Kinder Morgan and El Paso is the second-largest M&A deal announced this year, just behind the $39-billion U.S. AT&T purchase of T-Mobile.
Oil producer BP announced Monday that it reached an agreement with Anadarko Petroleum to settle all claims between the companies related to the Deepwater Horizon accident. As part of the settlement, Anadarko will pay BP $4 billion U.S. in a single cash payment and both parties have agreed to mutual releases of claims against each other.
Shares of Green Mountain Coffee Roasters dropped as Greenlight Capital hedge fund manager David Einhorn, who famously shorted Lehman stock, presented his negative view of the company at the Value Investing Conference in New York.
IBM reported its quarterly results after the market close.
On the economic front, the Empire State Manufacturing survey was released before the start of trading, showing that business conditions remained negative at 8.5. That's little changed from negative 8.8 in September.
The survey came in worse than expected, since it was forecast to have improved slightly to negative 4 in October, according to consensus estimates from Briefing.com.
A separate report showed that industrial production edged up 0.2% in September, after rising the same amount in the previous month, matching the forecast from Briefing.com.
The price on the benchmark 10-year U.S. Treasury dropped, pushing the yield up to 2.16% from 2.23% late Friday. Treasury prices and yields move in opposite directions.
Oil for October delivery declined 50 cents to $86.30 U.S. a barrel.
Gold futures for December delivery slipped $6.40 to settle at $1,676.60 U.S. an ounce.
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