BUSINESS

Stocks lower amid worries about Chinese growth, disappointment with U.S. Fed

07/12/2012 08:12 EDT | Updated 09/11/2012 05:12 EDT
TORONTO - The Toronto stock market finished in the red Thursday as pessimism about the latest Chinese growth figures added to worries about a slowing global economy.

The S&P/TSX composite index lost 119.17 points to 11,425.47 while the TSX Venture Exchange was down 23.59 points to 1,169.19.

The Canadian dollar rose 0.12 of a cent to 98.17 cents US.

U.S. markets also recovered somewhat as the Dow Jones industrials came back from a 110-point slide to close down 31.26 points to 12,573.27.

The Nasdaq composite index was down 21.79 points to 2,866.19 and the S&P 500 index dropped 6.69 points to 1,334.76.

The August crude contract on the New York Mercantile Exchange closed up 27 cents to US$86.08 a barrel after earlier going as low as $84.21 a barrel. The energy group lost 1.55 per cent and Suncor Energy (TSX:SU) fell 40 cents to $28.85 and Cenovus Energy (TSX:CVE) was down 71 cents to $32.57.

Crude moved up as the Obama administration said it is hitting Iran with more financial sanctions designed to hinder the country’s nuclear and ballistic missile programs.

Prices have plummeted from $106 in May amid expectations that a global slowdown led by Europe, the U.S. and China will undermine oil demand.

The base metals sector lost 2.74 per cent as copper prices slipped three cents to US$3.42 a pound. Teck Resources (TSX:TCK.B) dropped 45 cents to C$30.09 while Ivanhoe Mines (TSX:IVN) declined 47 cents to $8.33.

The gold sector was down about one per cent as bullion gave back $10.40 to US$1,565.30 an ounce. Barrick Gold Corp. (TSX:ABX) faded 49 cents to $35.17.

All TSX sectors were lower, save for a flat showing in the telecom sector, with financials down 1.24 per cent and Royal Bank (TSX:RY) shed 62 cents to $52.18 while Manulife Financial (TSX:MFC) lost 45 cents to $10.65.

There was a degree of suspense a day before the release of the latest Chinese economic growth data.

The report is expected to show growth in the three months ending in June fell as low as 7.3 per cent, down from the previous quarter’s nearly three-year low of 8.1 per cent. That is in line with this year’s official 7.5 per cent target. But revenues for companies in construction, shipbuilding and export manufacturing are down by up to half compared with a year ago.

The slowdown is a setback for economies around the world that were looking to China to drive demand for exports and support global growth.

John Johnston, chief strategist at David Rea Ltd. said 7.3 per cent growth "is a pretty hefty slowdown in China."

"The risk is they haven’t eased up a lot and the economy has some imbalances so it’s going to be harder to stimulate the economy this time than in 2008 and they really haven’t started yet. So, seven per cent now could easily turn into five per cent next year and that’s what is worrying people," Johnston said.

The U.S. Federal Reserve also provided disappointment.

There had been hopes Wednesday that the minutes of the most recent Federal Reserve meeting would indicate the Fed may engage in a third round of securities purchases aimed at increasing the supply of money in the economy, so-called quantitative easing.

The minutes showed members might be open to more stimulus but only after additional signs that the U.S. recovery is losing momentum.

Market watchers concluded that meant no likely action at the Fed’s next meeting July 31 to Aug. 1.

On the earnings front, Corus Entertainment Inc. (TSX: CJR.B) says its third-quarter net income was $42.2 million, or 52 cents per share compared with $40.3 million or 49 cents a year earlier, excluding discontinued operations. Revenue fell to $204 million in the three months ended May 31, down from $211.8 million in the third quarter of fiscal 2011. Corus shares fell $1.15 to $22.25.

Cogeco Cable Inc. (TSX:CCA) dipped 97 cents to $44.86 after it said its third-quarter profit from continuing operations edged up to $53. 2 million or $1.09 per share. That was five cents per share below a consensus estimate compiled by Thomson Reuters. The company also lowered one of its 2012 performance targets but said it expects to achieve its financial objectives with competitive marketing and cost controls.

Astral Media Inc.’s third-quarter profit was up seven per cent to $56.2 million or $1 per share from a year ago but missed analyst estimates by two cents. The company reported $265.5 million in revenue, missing forecasts of $276.4 million. Astral is being acquired by BCE Inc. (TSX:BCE) in a friendly deal awaiting approvals. Astral shares edged up seven cents to $49.14.

In other corporate news, the Maple Group Acquisition Corp. cleared its last major regulatory hurdles Wednesday in its takeover of the TMX Group Inc. (TSX:X) as the B.C. and Alberta securities regulators signed off on the deal. TMX shareholders will have the final say on whether the deal is approved and have until July 31 to tender their shares. TMX Group shares added 20 cents to $49.05.