Stocks in Canada’s most active market retreated on Thursday as the European Central Bank ruled out additional bond purchases, dashing hopes that the central bank will take more aggressive action to support the financial markets.
The S&P/TSX Composite Index fell back 196.94 points, or 1.6%, to end Thursday at 11,951.79
The Canadian dollar descended 1.21 cents to 97.86 cents U.S.
Most large caps moved lower with Teck Resources Ltd. down by $1.59, or 4.1%, to $37.17, and Agnico-Eagle Mines down by 89 cents, or 2%, to $43.26. Research In Motion extended losses, slipping 13 cents to $16.67.
Elsewhere, in the energy sector, Suncor was off $1.01, or 3.3%, to $29.50, while rival Imperial Oil shed 46 cents to $44.04.
In the gold sector, Goldcorp dropped 89 cents to $51.65, and Kinross Gold backpedaled 51 cents to $13.49.
Amid the general gloom, National Bank perked 61 cents to $67.03, after printing fiscal year-end net income of $1.213 billion, up 17% from the prior-year quarter.
Traders were disappointed after European Central Bank President Mario Draghi appeared to step back from the idea of aggressive buying of bonds of heavily-indebted countries.
They have been counting on a summit, due to start Thursday night, to produce a fix for the European debt crisis through closer budget controls among the 17 countries that use the euro.
The European Central Bank cut its key interest rate by a quarter-percentage point Thursday morning, to 1%. The central bank was widely expected to cut its rates by up to 0.5%, as the risk of a broad recession in Europe continues to rise.
There had been high expectations that the ECB was ready to do more to support bond markets if governments could agree on tighter spending oversight to ensure another debt crisis doesn’t recur.
Large-scale bond purchases would help drive down government borrowing costs, which have risen to crippling levels in Italy and Spain, Europe’s third- and fourth-largest economies.
By stabilizing the finances of Europe’s governments, the ECB would strengthen the continent’s financial system. European commercial banks that own government bonds face potentially huge losses and, as a result, they have curtailed lending to each other, banks and consumers. That credit squeeze is felt globally.
However, the ECB has been vocal in maintaining it does not want to be seen as the lender of last resort.
Economically speaking, housing starts took a beating in November. Figures released this morning by Canada Mortgage and Housing Corporation show the seasonally-adjusted annual rate of housing starts was 181,100 units last month, down from 208,800 in October.
ON BAYSTREET
The TSX Venture Exchange fell 21.83 points to 1,517.38, while the Nasdaq Canada index backtracked 8.34 points to 383.15
All 14 Toronto subgroups remained negative by the closing. Metals and mining collapsed 4%, while global base metals moved lower 3.7% and energy stocks sank 2.8%.
ON WALLSTREET
In New York, stocks tumbled Thursday, after European Central Bank President Mario Draghi frightened investors worldwide when he refused to commit to offering broad assistance to troubled eurozone countries and emphasized "substantial downside risks" for the European economy.
The declines once again reinforce the belief among investors that what happens in Europe can overshadow even continuing positive economic news out of the US or other economies. Investors ignored another round of positive job numbers released in the US Thursday morning.
The Dow Jones Industrials fell 198.67 points, or 1.6%, Thursday to close at 11,997.70
The S&P 500 folded 26.66 points, to 1,234.35, while the Nasdaq Composite subtracted 52.83 points to 2,596.38. The S&P and Nasdaq are both back in negative territory for the year.
Financial stocks cratered on news of more E.U. stress tests on banks and over increasing fears over the sector's exposure to troubled sovereign E.U. debt. Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase were all down between 3% and 7%.
Shares of Ford declined after the automaker announced a surprise quarterly dividend of five cents U.S. a share.
Shares of discount retailer Costco dropped after the company released quarterly results before the opening bell Thursday that missed analysts' expectations. The company reported earnings of 73 cents U.S. a share. Analysts surveyed by Thomson Reuters expected earnings of 80 cents a share.
Meat producer Smithfield Foods shares fell despite beating analysts' expectations, posting earnings of 76 cents U.S. a share.
Several traders said that today many investors are simply positioning themselves ahead of what could be a make-or-break meeting among E.U. leaders Friday to decide whether the countries will agree to closer political and economic coordination.
U.S. Treasury Secretary Tim Geithner is in Europe all week to meet with top government officials, highlighting the growing concern in Washington about the euro-zone debt crisis.
On the economic front, the U.S. government reported Thursday that the number of people filing for initial unemployment benefits fell to a nine-month low of 381,000 in the latest week.
The news initially boosted markets, as jobless claims for the week ending December 3 were expected to hit 395,000, according to a survey of analysts by Briefing.com.
Wholesale inventories for the month of October came in higher-than-expected at 1.6%. Economists had predicted a 0.2% increase, after contracting by 0.1% the month prior.
The price on the benchmark 10-year U.S. Treasury inched up, pushing the yield down to 1.97%, from 2.02% late Wednesday. Treasury prices and yields move in opposite directions.
Oil for January delivery gave back $1.94 to $98.55 U.S. a barrel.
Gold futures for February delivery dropped $31.50 to $1,713.30 U.S. an ounce.
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