The Toronto stock market fell sharply Thursday amid lowered expectations for the role the European Central Bank might play in helping to resolve the region’s worsening government debt crisis.
The S&P/TSX Composite Index fell back 154.63 points, or 1.3%, to 11,994.10 by noon
The Canadian dollar descended 0.97 cents to 98.10 cents U.S.
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.
The TSX financial sector lost ground with Royal Bank down 95 cents to $48.62 while Bank of Montreal lost 78 cents to $56.37.
National Bank wrapped up a string of earnings reports from the Canadian banks Thursday by posting a profit increase of 2% to $294 million while revenue increased to $1.19 billion.
National also boosted its quarterly dividend by four cents to 75 cents per share. Its shares gained 33 cents to $66.75.
Resource stocks were also lower as commodity prices lost early momentum. The higher U.S. dollar also pressured commodity prices.
A stronger greenback usually helps depress oil prices, which are denominated in dollars, as it makes oil more expensive for holders of other currencies.
Imperial Oil lost 64 cents to $43.86 while Canadian Natural Resources fell 90 cents to $37.35.
Base metal stocks declined as March copper on the Nymex was down six cents to $3.50 U.S. a pound. Teck Resources shed $1.05 to $37.71.
Barrick Gold faded $1.31 to $50.47
Elsewhere on the corporate front, BCE Inc. said Thursday it was upping its annual dividend by 5% to $2.17 per share for 2012 and its shares were up 27 cents to $40.45.
Canadian Oil Sands Ltd. announced Thursday it will spend $1.46 billion on its stake in the Syncrude oil project in 2012. Its shares advanced 10 cents to $20.45.
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 20.68 points to 1,518.53, while the Nasdaq Canada index backtracked 5.01 points to 386.48
All 14 Toronto subgroups went south by the lunch break. Metals and mining collapsed 3%, while global base metals moved lower 2.6% and energy stocks sank 1.4%.
ON WALLSTREET
In New York, stocks fell Thursday, after European Central Bank President Mario Draghi wouldn't commit to doing as much as investors hoped to help prop up troubled euro-zone countries and emphasized "substantial downside risks" for the European economy.
The Dow Jones Industrials fell 124.84 points, or 1%, at noon Thursday to 12,071.50
The S&P 500 folded 17.01 points, to 1,244, while the Nasdaq Composite subtracted 25.34 points to 2,623.87. The S&P and Nasdaq are both back in negative territory for the year.
Financial stocks were among the biggest drags on the broader market. Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase were all down between 3% and 6%.
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 U.S. a share.
Meat producer Smithfield Foods shares fell despite beating analysts' expectations, posting earnings of 76 cents U.S. a share.
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.
Meanwhile, the U.S. trade deficit for October due out later today is expected to hit $44.0 billion U.S., up from $43.1 billion U.S. in September.
The price on the benchmark 10-year U.S. Treasury inched up, pushing the yield down to 1.99%, from 2.02% late Wednesday. Treasury prices and yields move in opposite directions.
Oil for January delivery gave back $1.52 to $98.97 U.S. a barrel.
February gold fell $29 to $1,715.80 U.S. an ounce.
