The Toronto stock market was lower Tuesday amid more pessimism surrounding the euro-zone debt crisis after ratings agency Standard & Poor’s delivered another helping of bad news.
The S&P TSX Composite dipped 71.08 points to 12,048.25 by noon, after S&P warned that it may downgrade the European bailout fund’s AAA long-term credit rating. It says it could downgrade the rating of the European Financial Stability Facility by one or two notches.
The news came a day after S&P warned of a possible downgrade of the credit rating of 15 euro-zone countries, including continental economic powerhouse Germany.
The Canadian dollar regained 0.49 cents to 98.83 U.S. cents, as the central bank did as expected, keeping its overnight interest rate at 1% this morning, predicting that Europe's recession would be "more pronounced" than previously thought but giving no suggestion of an impending rate cut.
There was also major acquisition activity in the Canadian resource sector. Quadra FNX Mining Ltd. said it is being bought by Poland-based copper and silver producer KGHM Polska Miedz for $3.5 billion in cash. Shareholders of Vancouver-based Quadra FNX will receive $15 in cash for each common share of the company. Its shares surged $4.01 to $15.36.
The TSX financial sector declined following an earnings disappointment from Bank of Montreal.
BMO reported that its quarterly profit rose 21% to $897 million with results helped along by the acquisition of Wisconsin-based Marshall & Ilsley.
On an adjusted basis, profit was $1.27 a share, four cents less than analysts had expected, according to Thomson Reuters and its shares fell $2.39 to $57.45.
Elsewhere in the sector, Scotiabank lost 46 cents to $47.84.
Gold stocks also declined as Goldcorp Inc. lost 53 cents to $51.31.
The TSX energy sector lost ground with Suncor Energy falling 44 cents to $30.72 and Imperial Oil down 95 cents to $43.25.
News of the Quadra FNX deal pushed the base metals sector higher, partly on hopes for other acquisitions at fat stock premiums. HudBay Minerals gained 15 cents to $10.34 and Major Drilling Group ran ahead 93 cents to $15.23.
Copper prices were lower with the March contract on the Nymex down five cents to $3.56 U.S. News that China was easing lending in order to encourage growth pushed copper prices up almost 10% last week. China is the world’s biggest consumer of the metal.
In other corporate news, Precision Drilling Corp. announced it will take a charge of up to $120 million in the fourth quarter on the decommissioning of 36 drilling rigs and 13 service rigs.
Its shares fell 40 cents to $11.34.
Economically speaking, the Bank of Canada did as expected, keeping its overnight interest rate at 1% this morning, predicting that Europe's recession would be "more pronounced" than previously thought but giving no suggestion of an impending rate cut.
Elsewhere, figures released this morning by Statistics Canada revealed the value of Canadian building permits unexpectedly soared by 11.9% in October from September, as strength in Ontario helped end a three-month losing streak.
ON BAYSTREET
The TSX Venture Exchange faded 17.24 points to 1,536.11, while the Nasdaq Canada index sliced off 2.38 points to 393.55
All but three of the 14 Toronto subgroups broke for lunch in the red. Industrials and financials lost 1.1% each, while energy slid 1%.
The three gainers were metals and mining, marching up 2.4%, while materials and consumer staples nosed up 0.1% each.
ON WALLSTREET
In New York, stocks bounced between gains and losses Tuesday as investors remain cautiously optimistic that a lasting solution to the European debt crisis is in the works.
The Dow Jones Industrials approached noon up 44.05 points to 12,141.90
The S&P 500 tacked on 0.50 points, to 1,257.58, while the Nasdaq Composite subtracted 10.30 points to 2,645.46
The gains in the broader market came despite a warning from Standard & Poor's late Monday on European debt. The credit rating agency said it placed 15 euro-zone nations, including Germany and France, on review for a possible downgrade.
One expert said investors remain hopeful that European leaders will stop dithering and produce some sort of concrete solution to the long-running debt crisis at a summit this week.
The leaders of France and Germany agreed Monday on a new pact that they say will help enforce fiscal discipline and prevent a future debt crisis.
Meanwhile, the European Central Bank is widely expected to cut interest rates at its policy meeting Thursday.
While expectations are high for this week's summit, many investors say they are reserving judgment, since past summits have yielded disappointing results.
Shares of Darden Restaurants fell 9% after the company, which operates Red Lobster, Olive Garden and Longhorn Steakhouse chains, issued a dour outlook for the quarter and fiscal year.
Shares of SuccessFactors surged Monday, after German software maker SAP agreed to buy the company for $3.4 billion U.S. in cash. Shares of Taleo, SuccessFactors' rival, also spiked.
Shares of Taiwanese phone maker HTC were sharply lower ahead of a ruling on a key Apple patent suit. On Tuesday, a six-member panel at the International Trade Commission in Washington will rule on whether HTC's phones have violated two Apple patents.
The price on the benchmark 10-year U.S. Treasury faded a bit, nudging the yield up to 2.06% from 2.05% late Monday. Treasury prices and yields move in opposite directions.
Oil for January delivery gave back 32 cents to $101.67 U.S. a barrel.
Gold futures for February delivery fell $24.60 to $1,709.90 U.S. an ounce.
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