TSX down, worries mount about Spanish banks
TORONTO - The Toronto stock market lost early momentum Monday to close slightly lower as worries about Spain's financial sector trumped early optimism about the prospects of Greece remaining in the eurozone monetary union.
The S&P/TSX composite index had risen as much as 59 points to add to last week's strong gain but ended the session down 10.32 points at 11,566.15 while the TSX Venture Exchange climbed 15.74 points to 1,325.01.
"I think people are still worried about what the knock-on effects are (in the eurozone)," said Chris King, portfolio manager at Morgan, Meighen and Associates.
"(And) I think we’re bouncing around a trading range for awhile so we will go between very encouraging signs when the contagion risk is minimal to overblowing what the impacts could be."
The Canadian dollar benefited from higher commodities and a falling greenback, up 0.55 of a cent to 97.68 cents US.
U.S. markets are closed for the Memorial Day holiday, which typically results in subdued stock trading globally.
Polls released on the weekend favoured parties that support the tough austerity measures that have enabled Greece to receive international financial bailouts, reducing worries that Athens will exit the eurozone.
The polls’ findings pushed the main stock index in Athens from a 22-month low, up 6.9 per cent.
Greece's pro-austerity New Democracy party came first in all opinion polls published. The survey results were released three weeks before Greeks return to the polls after May election results proved inconclusive but with parties opposed to the bailout terms receiving unexpectedly high support.
That has raised worries that Greece could end up exiting the eurozone. Such a move would extend financial turmoil in Greece and spread financial difficulties to other countries using the euro.
Meanwhile there were still worries about how the government debt crisis is hurting other southern European countries. The interest rate, or yield, for 10-year Spanish government bonds on the secondary market — a key indicator of market confidence — rose 0.16 percentage points to close at 6.45 per cent.
The spike came as Spanish lender Bankia said it needs a €19 billion bailout, raising questions about how Spain intends to find the money.
At the same time, Spain’s prime minister, Mariano Rajoy, insisted that the country’s banking sector would not need an international rescue.
A rate of seven per cent is considered unsustainable over the long term and there is concern that Spain might soon be pushed join the ranks of Greece, Ireland and Portugal and seek an international bailout.
The industrials sector was the major decliner, down almost one per cent. Canadian Pacific Railway (TSX:CP) shares dropped $1.65 to $75.52 as the federal government introduced back-to-work legislation to end the strike by 4,800 CP workers. Labour Minister Lisa Raitt said she expects the railroad to be back in business by Thursday. Mediated contract talks between Canada's second-largest railway and the Teamsters union representing locomotive engineers and conductors collapsed Sunday.
Canadian National Railway Co. (TSX:CNR) shares lost $1.61 to $81.95. CN announced Monday morning that a three-year contract covering 210 train dispatchers in Canada has been ratified by members of the Teamsters Canada Rail Conference.
Commodities headed higher Monday amid expectations that the Chinese government is now ready to move on adding more stimulus to the economy.
The National Development and Reform Commission, China’s top economic planner, has approved three large steel construction projects. The approval follows a promise by Premier Wen Jiabao last week to encourage pro-growth policies.
China has also weighed on stocks and commodities because economic growth in the world's second-biggest economy has headed lower as the government deals with high inflation. The country has been a major prop for a global economy still struggling to recover from the 2008 financial collapse and subsequent recession.
The July crude contract on the New York Mercantile Exchange was up 29 cents to US$91.15 barrel in electronic trading on the New York Mercantile Exchange late Monday afternoon. The energy sector was ahead 0.46 per cent as Canadian Natural Resources (TSX:CNQ) rose seven cents to C$31.77.
The base metals sector was slightly higher as the Chinese report helped push copper two cents higher to US$3.47 a pound. China is the world's biggest consumer of the metal, which in turn is largely viewed as an economic barometer because it is used in so many industries. First Quantum Minerals (TSX:FM) was down 19 cents to C$18.47 while Taseko Mines (TSX:TKO) was ahead four cents to $2.85.
Bullion also advanced, up $4.10 to US$1,573 an ounce but the gold sector was off 0.25 per cent. Goldcorp Inc. (TSX:G) faded 51 cents to C$38.33.
Research In Motion Ltd. (TSX:RIM) shares were up five cents to $11.39 following a report that the BlackBerry maker is preparing for a major restructuring. The Globe and Mail reported that RIM could end up cutting at least 2,000 jobs worldwide. It said the announcement could come just before the end of RIM's first quarter June 2.
RIM announced Monday that chief legal officer Karima Bawa is retiring. Bawa’s retirement follows the departure last week of Patrick Spence, the BlackBerry maker’s head of global sales.
Postmedia (TSX:PNC.B) announced Monday that it will cease publishing Sunday newspapers in Calgary, Edmonton, and Ottawa. It also plans to make unspecified staff reductions across all of its newspapers. Postmedia shares were unchanged at $1.35.
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