TSX moves lower amid earnings disappointments, Greek bailout deal

Enlarge Image

Canadian bank headquarters are shrouded in fog and cloud as a sign board displays TSX numbers on December 30, 2011. THE CANADIAN PRESS/Frank Gunn

TORONTO - Earnings disappointments in the telecom and financial sector helped push the Toronto stock market lower Thursday while traders had a muted reaction to news of a deal that should allow Greece to secure its next financial bailout.

The S&P/TSX composite index slipped 23.09 points to 12,497.94 while the TSX Venture Exchange was off 0.92 of a point to 1,664.82.

The Canadian dollar closed ahead 0.05 of a cent to 100.44 cents US.

New York's Dow industrials closed up 6.51 points to 12,890.46. The Nasdaq was up 11.37 points to 2,927.23 and the S&P 500 index rose 1.99 points to 1,351.95.

Greece has been working to arrange a €130-billion bailout to stave off bankruptcy the could come as soon as late March. But the country's political leaders first had to approve a package of new austerity measures demanded by creditors.

On Thursday, a spokeswoman for prime minister Lucas Papademos said the agreement with the majority Socialists and the conservatives will allow alternative cuts to those rejected early Thursday during a meeting of the three coalition party leaders.

Although all the other cuts demanded by Greece's eurozone partners and the International Monetary Fund were approved, party leaders had balked at new pension cuts.

However, there was also doubt about whether the agreement will pass muster with other eurozone countries after Germany’s finance minister, Wolfgang Schaeuble, warned that the new round of spending cuts appears do not yet fulfil all the conditions for the bailout.

Analysts also pointed out that the feeling was that Greece will ultimately agree to the terms for the bailout and that investors have had plenty of time to dilute their holdings in that country.

"Greece to me is a non-event and I think the market is telling us that," said Allan Small, senior investment adviser at Dundee Wealth.

"I think those that had exposure to Greece had minimized that exposure over the last couple of years."

The Canadian corporate earnings season moved into high gear Thursday with reports coming in from some of the biggest names in the financial, communications and resource sectors.

The telecom sector led TSX decliners, down 0.94 per cent as BCE Inc. (TSX:BCE) said profits were up nearly 53 per cent in the fourth quarter to $486 million or 62 cents a share. Adjusted earnings rose 5.1 per cent to 62 cents a share, missing estimates by four cents. Revenues increased 10.4 per cent to $5.17 billion and its shares slipped $1.23 or three per cent to $39.62.

The industrials sector lost 0.25 per cent. Air Canada (TSX:AC.B) shares dropped 16 cents or 12.2 per cent to $1.15 as the carrier reported a quarterly net loss of $60 million. There was more bad news as the company’s pilots announced a strike vote.

The financials sector was also weak, with Manulife Financial Corp. (TSX:MFC) shares falling 23 cents to $11.88 after the insurer reported a fourth-quarter loss of $69 million as it booked a charge of $665 million related to low interest rates. Total revenue was $9.7 billion, up from $3.42 billion a year earlier.

"The issue obviously (for insurers) is low interest rates and the stock market not doing well," added Small.

"But my hope is that you get an offset there where the stock market continues to do better, offsetting the low interest rate environment because the hope is they have to set aside less for the guarantees in these segregated funds and all that."

The energy sector was down 0.2 per cent but shares in oilfield services company Precision Drilling Corp. (TSX:PD) added four cents to $11.36 after the company handed in quarterly net profits of $28 million or 10 cents a share.

The metals and mining sector was ahead per cent after Teck Resources Ltd. (TSX:TCK.B) reported fourth-quarter profit attributable to shareholders nearly doubled to $637 million, or $1.08 per share, a penny above analyst expectations. Quarterly revenues totalled $3 billion in the fourth quarter, compared with $2.7 billion a year ago. But its shares lost early momentum and finished the session just four cents higher at $40.79.

The consumer discretionary sector helped support the TSX as Canadian Tire Corp. (TSX:CTC) shares jumped $2.65 or 4.17 per cent to $66.15 as quarterly revenues rose 21 per cent to $3.1 billion. Excluding the impact of a positive tax settlement a year ago, earnings per share were up 43 per cent.

Commodity prices advanced following news of the Greek deal.

The March crude contract on the New York Mercantile Exchange headed $1.13 higher to US$99.84 a barrel.

Gold stocks stepped back even as the April bullion contract was ahead $9.90 at US$1,741.20 an ounce. Goldcorp Inc. (TSX:ABX) lost 41 cents to C$46.56.

The March copper contract in New York gained seven cents to US$3.97 a pound. Copper had earlier moved lower as investors eyed data showing January inflation figures for China came in well above expectations.

Consumer prices in the world's second-largest economy rose by an unexpectedly strong 4.5 per cent annual rate, up from December's 4.1 per cent. Food prices jumped 10.5 per cent, accelerating from the previous month's 9.1 per cent rate.

Markets have been hoping that inflation would move lower, allowing Chinese leaders to loosen lending requirements and encourage growth.

China is the world's biggest consumer of copper, which has surged almost 14 per cent so far this year on hopes for higher demand for the metal that is viewed as an economic bellwether because it is used in so many businesses.