The Toronto stock market started fourth-quarter trading in negative territory Monday on heightened Greece default worries
The S&P/TSX composite index tumbled 372 points, or 3.2%, to close Monday at 11,251.84
The Canadian dollar backslid another 0.42 cents to 94.99 cents U.S.
Worries about Greece came to the fore after the government said the country’s economy will remain in recession next year, causing it to miss its original deficit reduction targets.
The 2012 draft budget says Greece’s debts are projected to reach 172.7% of gross domestic product in 2012 while the deficit will drop to 6.8%, which is above the 6.5% originally agreed with international bailout creditors.
Debt inspectors from the International Monetary Fund, European Central Bank and European Commission, known as the troika, are in Athens reviewing reforms to see if Greece qualifies to receive the next euro8-billion installment of its bailout. Without it, Greece will run out of funds in mid-October.
A default would have serious repercussions for the European banking system and likely derail what is already a fragile economic recovery and send it into recession.
A recession would lower demand for oil, copper and other resources Canada produces. That would weaken exports and squeeze profits in Corporate Canada -- eroding a main driver of share prices on the resource-heavy TSX.
The energy sector was down as Suncor Energy lost $1.48 to $25.28 while Canadian Natural Resources gave back $1.72 to $29.05.
A stronger greenback usually helps depress oil prices, which are denominated in dollars, as it makes oil more expensive for holders of other currencies.
The December copper contract lost five cents to $3.11 U.S. a pound, taking the base metals sector down with it. Teck Resources declined $2.23 to $28.69 and First Quantum Minerals fell 78 cents to $13.17
Concerns about lower commodity shipments pushed Canadian railway stocks lower as Canadian National Railways fell $1.65 to $68.38 while Canadian Pacific Railway dropped $2.01 to $48.51.
Worries about the European banking system pressured Canadian banks, with the financial sector down. TD Bank fell $2.24 to $71.67 while Royal Bank was down $1.28 to $46.78.
The gold sector was off with Barrick Gold Corp. dipped 49 cents to $48.62.
North American stock markets ended last week up about 150 points. But the TSX and the Dow industrials both plunged about 12% during the third quarter amid increasing frustration and lack of confidence that European leaders can get a handle on the euro-zone’s government debt crisis.
Investors also worry that the global recovery is fast running out of momentum.
On the corporate front, Ivanhoe Mines and Rio Tinto have formally told the Mongolian government they are not prepared to renegotiate an investment agreement for the Oyu Tolgoi gold and copper mine, which is under construction.
The Mongolian Cabinet has asked the company and Rio Tinto, which owns a 49% stake in Ivanhoe, to discuss potential changes to the investment agreement, which can only be amended by mutual consent of all three parties. Ivanhoe shares gained 96 cents to $13.49.
Paladin Labs Inc. has dropped its attempt to acquire Afexa Life Sciences Inc., maker of the Cold-FX cold and flu remedy, clearing the way for a bid by Valeant Pharmaceuticals International.
Paladin shares were off 48 cents to $36.60, Valeant shares slipped $3.27 to $35.79 while Afexa shares dipped two cents to 84 cents.
Birchcliff Energy Ltd. said Monday it has begun shopping around for a buyer after receiving unsolicited expressions of interest. The Calgary company’s board did not disclose who the parties were, or how many had expressed interest. Birchcliff currently has production of about 19,250 barrels of oil equivalent per day. Its shares surged $1.43 to $11.61.
ON BAYSTREET
The TSX Venture Exchange capsized 77.77 to 1,389.40, while the Nasdaq Canada index lopped off 14.56 points to 401.49
All 14 Toronto subgroups were negative at the close. Metals and mining stumbled 6.4%, while energy stocks were 5.3% to the bad, and global base metals were down 4.2%.
ON WALLSTREET
In New York, a stock selloff gained momentum Monday afternoon as investors shrugged off a U.S. manufacturing report and focused on the worsening debt crisis in Europe.
By the close, the Dow Jones Industrials had collapsed 258.08 points, or 2.4%, to 10,655.30. Alcoa and Bank of America dragged on the blue-chip index, while Wal-Mart was the best performer.
The S&P 500 was negative 32.19 points to 1,099.23, while the Nasdaq dropped 79.57 points to 2,335.83.
The selling was broad, with all major sectors firmly in the red.
Shares of American Airlines' parent AMR Corp. tumbled amid speculation that the airline company could be headed for steeper-than-expected loss this year. The selling spilled over to other airlines, including U.S. Airways, United Continental, Delta, Jetblue and Southwest
Financial stocks including Citigroup, Bank of America, UBS and Morgan Stanley were also down sharply.
Stocks managed to briefly log some gains following a solid manufacturing report. The Institute for Supply Management index showed that U.S. manufacturing activity expanded in September, surprising economists who were anticipating some weakness.
But the positive impact didn't last long.
Investors' primary focus remains on Greece's attempts to deal with its deficit problems. Greece has slashed spending, reduced wages and raised taxes in an attempt to bring its debt under control.
The debt-ridden nation will miss key deficit targets for this year and next, according to the draft budget announced by the Greek cabinet late Sunday.
There isn't a whole lot of optimism that Greece will pull through. Almost all of the 22 economists surveyed in a new poll believe Greece will default on its debt by the end of next year.
As investors mull over the gloomy future, the market's fear gauge, the VIX, spiked 3% Monday to 44.36. Any reading above 30 signals investor worry.
A two-day meeting was underway in Luxembourg among the Eurogroup and Economic and Finance Ministers Council. Greece and the expansion of the stability fund are expected to be among the main topics of discussion.
Stocks are coming off an ugly day and an ugly quarter. Stocks were hammered Friday, with all three major stock indexes shaving more than 2%.
The losses capped the biggest quarterly drop for the S&P 500 and the Nasdaq since the fourth quarter of 2008.
Yahoo was a big winner on both the S&P 500 and Nasdaq, after the struggling online media firm announced a content alliance with ABC News, owned by Disney. On Friday, Alibaba Group CEO Jack Ma said that his Chinese Internet conglomerate would be "interested" in buying all of Yahoo.
Shares of Eastman Kodak surged more than 50% Monday, after plunging almost 60% Friday. Rumours swirled that the camera maker had hired a law firm for advice on a major restructuring or bankruptcy filing. The company later denied that it is planning bankruptcy moves.
Apple's new CEO, Tim Cook, will take the stage at the Town Hall auditorium on Apple's Cupertino, Calif., campus Tuesday to unveil the new iteration of the iPhone. Rumors are swirling over whether there will be one new iPhone or two.
Economically speaking, a report from the Commerce Department showed that construction spending jumped 1.4% in August, after falling 1.3% the prior month. Economists were expecting construction spending to slip 0.5% during the month.
Major auto manufacturers have also been reporting auto sales for September throughout the day.
GM said sales rose 19.8% during the month, above analyst expectations. Sales at Ford edged up 9%, and Chrysler Group said sales jumped 27%.
The price on the benchmark 10-year U.S. Treasurys rose sharply, lowering the yield to 1.79% from Friday’s 1.92%. Treasury prices and yields move in opposite directions.
Oil for October delivery surrendered $2.25 to $76.95 U.S. a barrel.
Gold futures for December delivery rose $35.40 to settle at $1,657.70 U.S. an ounce.
