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North American markets take a breather, World Bank cuts growth forecast

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TORONTO - North American stock markets closed lower Wednesday as the indexes took a breather from the near record levels hit in the last few sessions.

The S&P/TSX composite index pulled back 12.25 points to 14,892.13. The Canadian dollar gained 0.31 of a cent to 92.02 cents US.

There have been predictions that the Toronto market might soon reach its record close of 15,073 set on June 18, 2008, just before the recession that saw stock values plummet. But that may not be the case as the TSX searches for direction in the face of little economic data or earnings news.

In the U.S., the Dow Jones industrials dropped 102.04 points to 16,843.88, ending a five-day stretch of positive closes. The Nasdaq fell 6.07 points to 4,331.93 and the S&P 500 dipped 6.90 points to 1,943.89. The Wall Street indexes have been on a steady climb since April due to a number of encouraging economic reports, including solid jobs figures for May that were released last week.

The World Bank has said it plans to cut its 2014 global growth forecast to 2.8 per cent from 3.2 per cent, citing a bitter American winter and the political crisis in Ukraine. However, recent data such as solid U.S. hiring and stronger Chinese exports in May suggest prospects for growth in the second half of the year aren't all pessimistic.

On commodity markets, the July crude contract on the New York Mercantile Exchange advanced five cents to US$104.40 a barrel amid a report from the U.S. Energy Department that oil supplies fell by 2.6 million barrels in the week ended June 6, more than double the 1.2 million barrels analysts expected.

The Organization for Petroleum Exporting Countries (OPEC) which met in Vienna Wednesday is also expected to keep its output target of 30 million barrels a day unchanged.

Energy markets were impacted after al-Qaida inspired militants who overran much of the Iraqi city of Mosul on Tuesday. Mosul is in an area that is usually — though not currently — a major gateway for Iraqi oil.

August bullion climbed $1.10 to US$1,261.20 an ounce as the TSX gold sector led advancers with a 1.5 per cent jump. July copper declined by a penny to US$3.04 a pound, with the TSX metals and mining sector fading 0.77 per cent.

The telecom sector was the index's biggest decliner, falling 1.20 per cent. Shares in Bell Aliant (TSX:BA) dropped 2.59 per cent, or 75 cents, to $28.25, while Rogers Communications (TSX:RCI.B) stock declined by 2.3 per cent, or $1.03 to $43.67.

Allan Small, a senior adviser at Holliswealth, said the negative news from the World Bank and Iraq had given North American markets an excuse to take a "bit of a pause" and come down from near all-time highs.

"What we're going to see going forward is more of what we've seen so far... sort of a grind higher," he said. "I would be surprised to see the TSX get a significant jump."

Small anticipates oil and gold to eventually come down, which will weigh on the commodities-heavy TSX. But because other sectors like banks and railways have been pretty stable, the overall effect on the exchange won't be too drastic.

"There's your balance," he said. "We'll see a lot of sideways trading going forward."

On the corporate front, Lululemon's founder says there needs to be a shakeup with the board of directors at the yoga wear company if the company wants to increase shareholder value. Chip Wilson says he voted against two returning board members and urged others to do the same. But Lululemon's shareholders rejected the idea and re-elected both directors at the company's annual meeting in Vancouver. Lululemon reports its latest earnings on Thursday. Shares in the company closed down $1.18 or 2.59 per cent at US$44.30 in New York.

Follow @LindaNguyenTO on Twitter.

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