Latest News

The Canadian Press - ONLINE EDITION

TSX closes down: commodities depressed as Greek debt crisis sends U.S. dollar up

By: Malcolm Morrison, THE CANADIAN PRESS

19/03/2010 4:06 PM

(ADRIAN WYLD / THE CANADIAN PRESS)

TORONTO - Commodity stocks led the way to a sharply lower session on the Toronto stock market Friday after uncertainty over the Greek financial crisis pushed the U.S. dollar higher, which in turn helped drive down prices for oil and metals.

The S&P/TSX composite index fell 92.03 points to 11,947.98. The TSX Venture Exchange gave back 10.8 points to 1,564.06.

Related Items

Articles

The greenback continued to gain strength a day after Greece's prime minister said the country might turn to the International Monetary Fund for support if European leaders can't agree on a bailout plan that would restore confidence and reduce his country's high borrowing costs.

"At the end of the day, Europe doesn't want to be seen as not having matured into the role of being a fiscal guardian of the region," observed Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont..

Greek prime minister George Papandreou says he isn't asking for money but a clear mechanism for financial help in case Greece can't afford to borrow on the bond market because of too high interest rates.

EU leaders will meet next week in an effort to find a deal to help Greece. The uncertainty has undermined the stability of Europe's monetary union and sent investors scurrying for the perceived safety of the U.S. dollar, driving up the greenback.

The energy sector was down 1.33 per cent as the April crude contract on the New York Mercantile Exchange dropped $1.52 to US$80.68 a barrel. Suncor Energy (TSX:SU) dropped 85 cents to C$31.28.

The base metals sector fell 1.68 per cent with May copper two cents lower at US$3.37 a pound. Teck Resources moved down $1.21 to C$40.05.

The decline in the TSX base metals sector followed strong gains earlier in the week.

"We have had a really good rally in commodities. The base metal miners had really shot up over the last week or two so we're definitely giving back a chunk of that today," said Blair Falconer, portfolio manager at HSBC Securities Canada.

Gold companies traded lower as bullion prices also backed off, with the April contract in New York down $19.90 to US$1,107.60 an ounce.

Barrick Gold Corp. (TSX:ABX) shares were down 18 cents at C$40.14 as the world's biggest gold miner said it expects that an initial public offering of its African Barrick Gold spinoff will reap US$834 million in proceeds. The IPO for 101 million ordinary shares would be priced at 5.75 British pounds or C$8.79 per share on the main market of the London Stock Exchange.

Tech stocks were weak after U.S.-based Palm Inc. reported a wider-than-expected quarterly loss, and warned about its current quarter sales. The company said it is having a difficult time drawing consumer attention to its phones in a market dominated by iPhones and BlackBerrys. Its shares plunged $1.65 or 29.16 per cent to US$4 in New York.

On the TSX, the tech sector fell 2.35 per cent with shares in Research in Motion Ltd. (TSX:RIM) down $1.47 at $74.03.

The stronger American dollar also helped pushed the Canadian dollar down 0.26 of a cent to 98.39 cents US.

The loonie had run up strongly to above the 99-cent level earlier Friday after Statistics Canada said consumer prices rose 1.6 per cent last month, following a 1.9 per cent increase the previous month. Economists had been expecting prices to rise at an annualized rate of 1.4 per cent.

One reason for the dollar's steady run towards parity with the U.S. dollar this year has been the expectation that the Bank of Canada will raise interest rates, likely as soon as this summer.

Core inflation, which excludes volatile items such as energy and food, also was higher than most forecasts. It rose one percentage point to 2.1 per cent, the first time it has been above the closely watched target of two per cent since December 2008.

Investors were taken aback after India's central bank unexpectedly raised interest rates for the first time since July, 2008 after inflation ran ahead to a 16-month high. The Reserve Bank of India increased the benchmark reverse repurchase rate by a quarter point to 3.5 per cent.

That move rekindled concerns about central banks removing stimulus too early.

The Bank of Canada, on the other hand, has been telegraphing for months that it planned to raise interest rates sometime after mid-2010.

Meanwhile, there was a further indication that Canada is making a strong exit from the recession as a burst of strong sales at home improvement outlets helped send retail sales up 0.7 per cent in January. That was higher than the 0.5 per cent reading economists had been expecting.

New York markets lost early momentum to move lower. New York's Dow Jones industrials moved down 37.19 points to 10,741.98. The Nasdaq composite index dropped 16.87 points to 2,374.41 while the S&P 500 index lost 5.93 points to 1,159.9.

The TSX started the week off above the 12,000 level for the first time since September, 2008. But sovereign debt worries pushed the main index down 65.84 points this week.

Oil and gas producer Nexen Inc. (TSX:NXY) and partner Shell (NYSE:RDS.A) have made a "significant" oil discovery in the eastern Gulf of Mexico, Nexen said Friday. Calgary-based Nexen said this would be the third discovery in the area and its results "exceeded our pre-drill expectations." Nexen shares were ahead 47 cents at $24.41.

Eldorado Gold Corp. (TSX:ELD) shares fell 65 cents to $12.91 even as the company reported profits of $33.3 million in its fourth quarter, with revenue from gold sales increasing 29 per cent due to record production and higher gold prices.