TSX in for lower open as commodities slide
A Toronto Stock Exchange ticker is seen at The Exchange Tower in Toronto on August 18 2011. THE CANADIAN PRESS/Aaron Vincent Elkaim
TORONTO - The Toronto stock market headed for a sharp loss at the open Tuesday as commodity prices retreated amid worries that the eurozone debt crisis is worsening.
The Canadian dollar fell 0.37 to 100.33 cents US as traders avoided risky assets, including commodity-based currencies such as the loonie.
Instead, they opted for the safe haven status of U.S. Treasuries after Greece’s main parties were unable to form a government following an indecisive weekend election. Voters punished the two parties that have overseen the country’s harsh austerity measures and left no party with enough votes to form a government. Now, another election looks increasingly likely for the country, which is being supported by bailouts.
But analysts warn that Greece could run out of money as soon as next month without a government to negotiate the next level of its financial bailout.
U.S. futures were also firmly in the red with the Dow Jones industrial futures down 51 points to 12,908, the Nasdaq futures sliding 12.2 points to 2,624.2 and the S&P 500 futures falling five points to 1,360.8.
Commodity prices lost ground because if Greece can’t stay solvent, it risks falling out of the eurozone, with potential knock-on effects throughout the global economy.
As it is, the economies of many heavily-indebted eurozone countries are worsening as tough austerity measures adopted to rein in spending are crushing growth.
Commodities have also suffered in recent weeks because of indications of slowing economic performance in the U.S. and China.
The June crude contract on the New York Mercantile Exchange fell 76 cents to US$97.18, its lowest level since early February. Crude has slumped more than eight per cent since the beginning of the month on demand concerns.
Copper prices are also down sharply from May 1, losing about 3.5 per cent. The July contract was down seven cents to US$3.71 a pound. Copper is viewed as an economic bellwether as it is used in so many industries.
Bullion prices also backed off, down $9.70 to US$1,629.40 an ounce.
Markets ended Monday trading lower after weekend elections in Greece and France led to a sharp shift in the political landscape with the focus shifting away from austerity. In France, President Nicolas Sarkozy was thrown out of office by voters opposed to his belt-tightening program and replaced by Socialist Francois Hollande, who wants growth to become a more central plank of Europe’s debt crisis resolution.
European markets were lower with London's FTSE 100 index off 0.08 per cent, Frankfurt's DAX down 0.65 per cent and the Paris CAC 40 dropping 0.86 per cent.
Earlier, Asian shares posted modest gains. Japan’s Nikkei 225 index edged up 0.7 per cent a day after closing at its lowest level in three months. South Korea’s Kospi added 0.5 per cent while Australia’s S&P/ASX 200 rose 0.3 per cent.
There was also plenty of earnings news to digest.
Food company George Weston Ltd. (TSX: WN) said first-quarter net earnings attributable to shareholders grew 18 per cent to $124 million from $105 million in the quarter a year earlier. Sales increased one per cent to $7.22 billion from $ 7.15 billion a year ago.
Franco-Nevada Corp. (TSX: FNV) reported Tuesday that its first-quarter net income rose 121 per cent to US$46.8 million and raised its monthly dividend by 12.5 per cent to 33 cents a share. Revenue climbed 44 per cent to US$105 million from $73.1 million.
Brookfield Infrastructure (TSX:BIP.UN) reported first-quarter net income of US$14 million or eight cents per unit, compared with US$45 million or 29 cents per unit in the same 2011 period. Funds from operations were US$108 million, up from US$98 million.
Uranium One Inc. (TSX:UUU) said its first-quarter earnings fell to $4.5 million from $14 million a year ago as it reported increased production, but lower uranium prices and a hedging-related charge. Revenue was $95.9 million compared to $101.9 million.
Excluding one-time items, the company reported adjusted earnings of $15.1 million, or two cents per share, compared with $15 million, or two cents in the same quarter of 2011.
On Tuesday, Yellow Media Inc. (TSX:YLO) reported a first-quarter loss of $2.9 billion as the struggling directory publisher wrote down the value of its assets. The company also cancelled its annual meeting planned for Tuesday in Montreal after it said the number of shareholder votes received will not be enough to reach quorum. Revenues were $289.1 million compared to $349.4 million for the first quarter in 2011. Excluding the one-time charge, the company earned $57.5 million.
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