The Toronto stock market was sharply lower Tuesday after Greece’s decision to hold a referendum on its latest rescue package stunned investors and sent shockwaves of uncertainty through global markets.
The S&P/TSX composite index plunged 136.96 points or 1.1%, to 12,115.10, well off the worst levels of the day, when the index plunged well over 300 points, as gold stocks moved higher while there were reports that the referendum might not take place.
The Canadian dollar got caught up in the pessimism, losing 1.72 cents to 98.29 cents U.S. as traders piled into the safe haven status of the U.S. dollar.
If the vote does go against the bailout, Europe could face a messy and disorderly debt default and Greece could end up pulling out of the euro as a currency.
CNBC cited a Greek Socialist party official as saying Papandreou’s referendum call is "basically dead."
The TSX energy sector fell as Suncor Energy gave up 83 cents to $30.92 while Canadian Natural Resources dropped $1.11 to $34.05.
Metal prices also retreated as the December copper contract in New York dropped 13 cents to $3.50 U.S. a pound, sending the base metals sector down. Teck Resources backed off $1.87 to $38.09 while Quadra FNX Mining lost 26 cents to $11.24.
The gold sector gained while Goldcorp Inc. rose $1.45 to $49.95 while Barrick Gold Corp. climbed $1.09 to $50.30
Worries over how a messy default could damage the euro-zone’s banks pushed the TSX financial system down. Royal Bank lost $1.58 to $47.04 while Manulife Financial declined 74 cents to $12.42.
Risk appetite was further dulled by data showing weaker than expected manufacturing growth in China as a government industry group reporting the slowest growth in nearly three years.
The China Federation of Logistics and Purchasing said Tuesday that its monthly purchasing managers index fell an unexpectedly large 0.8 percentage points to 50.4, just above the 50-level that signifies expansion. It forecast the economy would continue to slow in the last months of the year.
China’s huge appetite for commodities has driven prices for oil and copper sharply higher and also supported the resource-heavy TSX. Its growth is seen as critical in supporting a fragile global economic recovery.
In earnings news, global information services company Thomson Reuters Corp. earned $381 million U.S. or 44 cents a share in the third quarter as the company outdid analyst expectations with higher revenue. Its shares were up 21 cents to $29.70.
Oil and gas pipeline company TransCanada Corp. said net income attributable to common shares rose 11% in the third quarter to $384 million on stronger revenues. Earnings were 55 cents on a per share basis, falling short of analyst expectations of 57 cents per share and its shares were off 28 cents to $42.09.
Atlantic Canada telecom company Bell Aliant Inc. had $75.8 million of net income in its third quarter with growth in Internet and TV revenues, turning around a$400,000 loss it recorded a year earlier. Its shares were up three cents to $28.09.
ON BAYSTREET
The TSX Venture Exchange plummeted 26.02 points to 1,588.88, while the Nasdaq Canada index docked 17.75 points to 417.34
All but four of the 14 Toronto subgroups went south on the day. Metals and mining suffered most of the damage, falling 3.5%, while financials tumbled 2.8%, and energy subsided 2.2%
The four gainers were led by gold, up 2.3%, materials, progressing 0.6%, and industrials, nipping up 0.1%.
ON WALLSTREET
In New York, stocks trimmed some of their losses Tuesday afternoon amid chatter that Greece's referendum on the bailout deal may not happen after all.
The Dow Jones Industrials plummeted 297.05 points, or 2.5%, to finish at 11,676.40
The S&P 500 slid 35.02 points to 1,218.28, while the Nasdaq Composite Index shed 77.45 points to 2,606.96.
Earlier, all three indexes were off around 3% as investors were spooked by Greek Prime Minister George Papandreou's surprise announcement, fearing that a public vote will jeopardize Europe's debt deal.
Late Tuesday afternoon, stocks clawed back some of those losses following a Dow Jones Newswires report that cited a Greek Socialist Party official saying the referendum is "basically dead."
That would pave the way for the bailout to move forward. But it's far from a done deal.
The market's fear gauge, the VIX, spiked 17% to 35.19. Any reading above 30 signals investor worry. Earlier, the index has surged 25%.
Stocks are coming off sharp losses Monday, as questions and doubts arose regarding the rescue package agreed upon by European leaders last week.
The recent selling puts the S&P 500 and Nasdaq back in negative territory for the year, while the Dow is up just 1.5% in 2011.
Bank stocks were hit especially hard in Tuesday's selloff, with shares of Morgan Stanley and Citigroup shares off more than 6%. Bank of America, JP Morgan Chase and Goldman Sachs were down between 3% and 5%.
Pfizer shares rose after the company reported quarterly earnings that beat Wall Street's estimates. The drug maker was the only gainer on the Dow, and among a handful of S&P 500 stocks in positive territory.
Shares of Baker Hughes plunged, making it the biggest decliner on the S&P 500. The oilfield contractor missed earnings estimates.
MetroPCS shares also fell after the wireless service provider reported lackluster earnings results.
Meanwhile, Bank of America said it will drop its planned $5 U.S. debit card usage fee after widespread customer complaints.
On the economic front, monthly reports on manufacturing, construction spending and auto sales are being released today.
The ISM index is expected to show manufacturing activity expanded in October to a reading of 53, up from 51.6 in September. Any level above 50 indicates growth in the sector.
Meanwhile, analysts surveyed by Briefing.com expect construction spending to have risen by 0.3% for September, following a 1.4% increase in August.
The price on the benchmark 10-year U.S. Treasury rose sharply, lowering the yield to 2% from 2.18% late Monday. Treasury prices and yields move in opposite directions.
Oil for October delivery fell $1.80 to $91.39 U.S. a barrel
Gold futures for December delivery fell $26.30, or 1.5%, to $1,698.90 U.S. an ounce.
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