Canadian stocks traded higher on Tuesday on optimism over the Chinese government’s move to prop up the economy. But the gains were held in check throughout the afternoon after a ratings company downgraded Spain’s rating further into junk territory.
Even so, the S&P/TSX Composite Index clung to 43.15 points worth of gains to end Tuesday’s trading at 11,609.30.
The Canadian benchmark index had opened higher on news that China will expand its value-added-tax overhaul and speed up government-related spending projects.
But the Toronto market lost some momentum as Egan-Jones Ratings Co. slashed Spain’s sovereign rating to B from BB-, citing the possibility that the government will likely have to extend more support to its banking sector.
The ratings agency also put the probability of a default by Spain within a year at 15%.
Among notable gainers were Agrium Inc., which rallied 2.6% to $81.91 and Royal Bank of Canada, which rose 0.9% to $50.86
Bank of Nova Scotia advanced 2.3% to $51.98 even after the bank reported its second-quarter profit fell almost 10%.
On the losing end were gold mining and telecommunications shares. Barrick Gold shares demurred 3.6% to $39.75, while Goldcorp fell back 3.1% to $37.13 and Kinross Gold let go of 1.7% to $8.28.
In the energy field, Imperial Oil shares hiked 1.5% to $42.39, while Suncor gained 1% to $29.18, and Canadian Natural Resources progressed 0.9% to $32.05
ON BAYSTREET
The TSX Venture Exchange faded 15.67 points to 1,309.34. The Nasdaq Canada index squeezed out a gain of 0.82 points to 366.31.
In all, 10 of the 14 Toronto subgroups were up. Global base metals triumphed 2.4%, while metals and mining stocks advanced 1.7% and industrials gained 1.4%.
The four laggards were weighed mostly by gold, off 2.3%, materials, dipping 1.1%, and telecoms, sliding 0.2%.
ON WALLSTREET
U.S. stocks enjoyed some momentum Tuesday as investors welcomed a lack of negative headlines out of Europe and hopes that China will move to support its economy.
The gains came despite a weaker-than-expected report on U.S. consumer confidence and continued declines in home prices.
The Dow Jones Industrials concluded the day ahead 125.86 points, or 1.1%, to 12,580.70
The S&P 500 prospered 14.90 points to 1,332.72. The tech-rich Nasdaq Composite Index raced ahead 33.75 points to 2,870.99
However, domestic markets gave back some of the day's early gains as a rally in the oil market evaporated.
Shares of Facebook fell another 9.6% to below $28.84 U.S., hitting a new low since the social media company debuted as a public company on May 18. Facebook is trading at 22% below its IPO price.
Investors were encouraged by signs over the weekend that pro-bailout parties in Greece were gaining in the polls. In addition, four major Greek banks received recapitalization funds under the nation's bailout program.
The extra capital helped ease concerns that a so-called bank jog in Greece could develop into a full-blown bank run.
Spain is also prominent in investors' minds amid fresh worries about the health of its banking system, after the Spanish government agreed last week to inject €19 billion into one of the nation's largest lenders.
The yield on 10-year Spanish government bonds eased slightly Tuesday, one day after the spread between Spanish and German debt reached the highest level since the creation of the euro.
Investors have also been fearful that the slowing of China's economy could cause a so-called "hard landing" for the world's number-two economy. But there is speculation Beijing will announce more stimulus spending in China, including a program to spur auto purchases.
The focus could shift back to the U.S. economy from overseas worries, given the importance of upcoming reports.
Due later this week is the May jobs report, as well as key readings on manufacturing and auto sales. Economists forecast that employers added 150,000 jobs in May, and that unemployment remained at 8.1%.
U.S. stocks fell Friday, but ended higher for the week, as concerns about the debt crisis in Europe continued to weigh on the market. U.S. markets were closed Monday for Memorial Day.
Worries over Greece's future and the broader region's debt problems have already triggered deep losses in U.S. stocks and international markets this month. The S&P 500 and Dow are down almost 6% in May, and headed for their worst monthly losses since November 2011.
Economically speaking, the Case-Shiller 20-city Index, which tracks home prices, fell 2.6% in March, after falling 3.5% in the prior month. Economists had expected the index to have slipped 2.8%.
The Conference Board's Consumer Confidence Index for May fell to 64.9, after falling to 68.7 last month. Economists had expected the index to ease to 69.4 in May, according to a consensus forecast from Briefing.com.
The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 1.73% from 1.74% late Friday. Treasury prices and yields move in opposite directions.
The price of a barrel of oil was down 21 cents to $90.65 U.S.
Gold futures for June delivery fell $17.20 to $1,552.80 U.S. an ounce.
