TSX down 10 per cent from 2011 highs amid deteriorating economic confidence

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Monday June 13, 2011, 2:40 pm
By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market racked up a sharp decline Monday afternoon, pushing its main index into correction territory as commodity prices continued to fall on concerns that the global economic recovery has largely stalled.

The S&P /TSX composite index fell 101.27 points to 12,982.73, amounting to a downturn of just over 10 per cent from the 2011 intraday highs reached Mar. 7.

"Our expectations of where things were going to go from an economic standpoint just became a little unrealistic for the short term," said Gareth Watson, vice-president investment management and research, Richardson GMP Ltd.

"The market has been caught off guard with these weaker U.S. economic data points that have come out in the second quarter. They were hoping that they would show some more momentum behind Q1. And certain data points in particular, like employment, has really thrown a lot of stuff up in the air."

The TSX Venture Exchange dropped 16.43 points to 1,918.5.

Tumbling oil prices helped send the Canadian dollar down 0.07 of a cent to 102.15 cents US.

All sectors save health care sold off with the energy component leading decliners, down 2.13 per cent as oil prices fell to below $97 a barrel Monday, extending a big loss from Friday after a report said Saudi Arabia plans to boost its crude production.

The July crude contract on the New York Mercantile Exchange lost $2.68 to US$96.61 a barrel.

Saudi newspaper al-Hayat reported Friday that the country will increase production 13 per cent, or about 1.14 million barrels per day, to boost global supplies and help lower prices. Earlier last week, the Organization of Petroleum Exporting Countries failed to reach consensus to raise output and left the cartel’s production quotas unchanged.

Canadian Natural Resources (TSX:CNQ) declined 72 cents to C$38.62 while Suncor Energy (TSX:SU) slipped 43 cents to $37.64.

The base metals sector gave up early gains to move down 1.18 per cent as metal prices fell for a fourth day, with the July contract on the Nymex down three cents to US$4.02 a pound. HudBay Minerals (TSX:HBM) lost 23 cents to C$13.32 and Taseko Mines (TSX:TKO) was off 14 cents to $4.38.

Gold stocks fell alongside lower bullion prices, down $13.60 to US$1,515.60 an ounce. Centerra Gold (TSX:CG) faded 35 cents to C$15 and Goldcorp Inc. (TSX:G) lost 66 cents to $45.54.

The financial sector also depressed the TSX as Scotiabank (TSX:BNS) lost 66 cents to $56.92 while Royal Bank (TSX:RY) shed 24 cents to $54.09.

The TSX fell 3.2 per cent last week on top of a two per cent slide the previous week. Investor confidence in the U.S. economy has sharply deteriorated over the last month amid a variety miserable economic data, including slowing expansion in manufacturing and a jobs report for May that widely missed expectations.

Pessimism deepened last week after the U.S. Federal Reserve 's latest cross-country survey of economic conditions showed that the economy slowed in several U.S. regions this spring and the Dow Jones industrials lost 1.6 per cent.

A slowing Chinese economy also concerns investors. Data released Monday showed a dip in bank lending and traders awaited inflation figures due out Tuesday that could show the consumer price index surging to more than six per cent. The Chinese government has been trying to slow the economy to deal with high levels of inflation, particularly high food prices.

Traders also took in the formal launch of a takeover bid for the TMX Group Inc. (TSX:X) by Maple Group Acquisition Corp.

The official submission from a newly-expanded Maple Group offers to buy 70 per cent of TMX for $48 per share, valuing TMX at about $3.7 billion. The Maple group hopes that will be enough to make a case for its offer instead of a transatlantic merger planned by the owners of the Toronto and London stock exchanges.

The bid comes a day after Maple Group added four additional financial companies to the mix. The new investors are Desjardins Financial Group, Dundee Capital Markets (TSX:DCM), GMP Capital Inc. (TSX:GMP) and Manulife Financial (TSX:MFC). TMX shares were up 72 cents to $44.52.

New York markets maintained modest gains as the Dow Jones industrial average was up 37.81 points to 11,989.72.

The Nasdaq composite index gained 5.17 points to 2,648.9 while the S&P 500 index rose 4.19 points to 1,275.17.

In other corporate news, talk continued between Air Canada (TSX:AC.B) and its customer service and sales staff to head off a strike threat, but there’s no sign of a settlement. But both sides hope they can hammer out a deal before a union imposed strike deadline of 12:01 a.m. Tuesday. Air Canada shares slipped 12 cents to $1.82.

Shares in convenience store operator Alimentation Couche-Tard Inc. (TSX:ATD.B) gained 29 cents to $26.87 after it said it will acquire up to 322 additional U.S. retail sites from ExxonMobil ( NYSE :XOM) for an undisclosed price. The locations will become part of the Montreal-area company’s Circle K retail network and will continue to sell Mobil-branded fuel.

VF Corp., whose brands include Wrangler, Nautica and The North Face, said Monday it will buy boot and clothing maker Timberland Co. for more than US$2.2 billion. VF is offering US$43 for each Timberland share, a premium of 43.4 per cent to the latest Timberland closing price. VF shares ran up $9.68 to US$101.48.