The Toronto stock market tumbled Wednesday as German moves to support the euro by cracking down on speculators failed to reassure investors that the European Union can contain a government debt crisis.
The S&P/TSX composite index ended Wednesday’s session off 98.74 points to 11,665.77, after Germany’s regulator announced it was banning so-called naked short selling of euro-zone government bonds, as well as shares in 10 key German financial institutions until March 31, 2011.
The index had been off more than 200 points during the day.
In a typical short sale, a trader sells borrowed shares in hopes of buying them cheaper later and profiting on the difference. A "naked" short is when traders sell shares without borrowing them first. The euro initially responded badly to the German move, dropping to a four-year low of $1.2146 U.S. before recovering to trade at $1.2349 U.S.
There were also big swings in other currencies and commodities as investors digested the action by the euro-zone’s biggest economy.
The German move rattled markets in part because it suggests that policy-makers are grasping at straws to stem flagging confidence about the ability of European governments to pay off their heavy debt amid slow growth.
The TSX energy sector fell as Suncor Energy fell 16 cents to $31.15 and Canadian Natural Resources fell $35.98, or 50.8%, to $34.80.
Among gold, issues, Barrick Gold Corp. faded $1.64 to $44.46 while Kinross Gold Corp. lost 77 cents to $18.05.
The July copper contract in New York was also off early lows, down seven cents to $2.96 U.S. after earlier dropping eight cents. The base metals sector was down as Teck Resources dropped 85 cents to $32.68 and First Quantum was off $2.91 to $62.74.
Outside commodities, the industrial sector was the biggest decliner as Canadian Pacific Railway shed 91 cents to $56.69.
In earnings news, Canaccord Financial Inc. reported a profit of $7.5 million for its fourth quarter and an annual profit of $38.5 million. It was a big improvement on comparable periods a year earlier, when Canaccord’s fourth-quarter net income was just $3.6 million and fiscal 2009 recorded a $47.6-million annual loss. Its shares were off 32 cents to $9.12.
Elsewhere, proxy shareholders of Goldcorp have overwhelmingly voted down a resolution to suspend mining activities at the company’s Marlin mine in Guatemala so new consultations can be held with indigenous people concerned it’s affecting their health. Its shares were down $1.98 to $44.11.
Shareholders have voted overwhelmingly in favour of merging Quadra Mining Ltd. and FNX Mining Company. The combined company will have major copper, nickel and precious metals holdings in Ontario’s Sudbury basin as well as mines in the United States and Chile. Quadra shares gained 43 cents to $12.08 while FNX shares were ahead 31 cents to $10.46.
In economic news, Statistics Canada said wholesale sales were up 1.4% to $44.4 billion in March, rising for a fourth time in five months.
The Canadian dollar moved down 1.31 cents to 95.11 cents U.S.
ON BAYSTREET
All but two of the 14 TSX subgroups were lower. Gold slipped 3.4%, while materials lost 3.2% of their strength and the metals and mining group fell 2.4%.
The two gainers were health-care stocks, down 0.3%, and financials, off 0.2%.
The TSX Venture Exchange capsized 54.37 points to 1,486.09, while the Nasdaq Canada index moved 12.29 points lower to 711.72
ON WALLSTREET
In New York, stocks recovered from deep losses posted earlier in the session to end modestly lower Wednesday, after investors welcomed the Fed's forecast of an improving economy despite lingering fears about the global economy.
Still, the Dow Jones industrial average stumbled 66.58 points to 10,444.37
The S&P 500 index was down 5.75 to 1,115.05. The Nasdaq composite index lost 18.89 points to 2,298.37
Stocks had tumbled Tuesday as investors shrugged off better-than-expected earnings from U.S. retailers and remained focused on European debt problems after the euro hit a four-year low against the dollar.
The euro-zone's fiscal troubles remained in the spotlight for most of Wednesday following Germany's announcement that it will ban "naked" short selling. But the Fed's minutes released later in afternoon lifted the central bank's outlook for the economy, and in turn boosted investor confidence and prompted U.S. stocks to regain some ground.
While fear and uncertainty will continue to drag on markets in the near future, analysts expect a steady turnaround to take hold in the second half of year as investors shift more attention to the strength in U.S. economy.
The CBOE Volatility index, or the VIX, the market's fear gauge, spiked 15.5% to its highest point since May 7, the day after the market's flash crash. It later recovered to just 3.7% higher.
On the economic front, investors showed little reaction to a tame inflation reading. The Labor Department said its consumer price index slipped 0.1% in April on a monhtly basis, but climbed 2.2% compared to a year earlier. Still, that's the smallest annual increase since January 1966.
The government's report showed that core CPI, which excludes volatile food and fuel prices, held steady with March's figures and rose 0.9% on an annual basis.
Economists had expected the CPI and core CPI to edge up 0.1%, according to a consensus forecast from Briefing.com.
A report from the Mortgage Banker Association showed that a record 10.06% of borrowers were behind on the payments during the first quarter of 2010.
Investors also took in minutes from the Federal Reserve's latest policy meeting. The central bank improved its outlook for economic growth this year and decreased its forecast for the unemployment rate.
Senators are scheduled to take a crucial test vote on Wednesday afternoon to end debate on the financial reform legislation.
Proponents of the bill need 60 votes to pass the test, which would set the bill for a final vote by the end of the week. Wednesday's effort is a preview of what could happen because just 51 votes are needed for final passage.
Target reported Wednesday that its quarterly profit rose 28% to $671 million U.S. from a year ago. The retailer's earnings per share of 90 cents U.S. missed analysts' expectations of 91 cents U.S. per share.
Treasury prices gained ground, lowering the yield on the 10-year note to 3.36% from Tuesday’s 3.38%. Treasury prices and yields move in opposite directions.
The price of a barrel of oil picked up $1.84 to $71.25 U.S.
Gold prices tumbled $23 to $1,191 U.S. an ounce
