BUSINESS
04/23/2012 09:55 EDT | Updated 06/23/2012 05:12 EDT

Toronto Stock Exchange Plummets As Markets Pull Back On Uncertainty In Europe, Commodity Price Weakness

CP

TORONTO - The Toronto stock market closed Monday with a triple-digit loss as concerns about the European economy's debt crisis spread around the globe.

The S&P/TSX composite index ended the session down 1.3 per cent, or 158.18 points at 11,989.10, with all major sectors weaker. Earlier in the day the TSX had fallen as much as 1.9 per cent, marking its biggest drop since December.

The TSX Venture Exchange slid 26.92 to 1,371.03.

The Canadian dollar was ahead 0.16 of a cent to 100.91 cents US.

Markets around the globe weakened as key surveys showed a decline in economic activity in both the eurozone and China.

The European Union statistics office released data that suggests it may be a long time before countries there bring deficits and debt under control, or at least below EU-stipulated limits of a deficit of three per cent and debt of 60 per cent of gross domestic product.

At a time of harsh austerity measures in Europe, overall debt rose to 87.2 per cent of GDP — the highest level since the euro was created in 1999.

Meanwhile, questions about France's political future proliferated. Socialist Francois Hollande was the leader in first-round voting in the French presidential election, positioning him to oust President Nicolas Sarkozy in a run-off vote.

While polls correctly predicted Hollande would come out ahead of conservative Sarkozy in Sunday's first round, an unexpectedly strong showing by far-right candidate Marine Le Pen added another element of uncertainty.

On Wall Street, the Dow Jones industrial average fell 102.09 points to 12,927.17, the Nasdaq was down 30 points at 2,970.45 and the S&P 500 index dropped 11.59 points to 1,366.94.

Commodities weakened overall, with the June crude contract on the New York Mercantile Exchange down 77 cents to settle at US$103.11 a barrel.

Bullion prices ended the session down 0.6 per cent with the June contract off $10.20 to US$1,632.60 an ounce. And copper prices moved a penny higher to US$3.63 a pound.

Major weights on the TSX included Barrick Gold (TSX:ABX), which fell 67 cents to C$39.29.

Royal Bank (TSX:RY) dropped 65 cents to $56.50 with the financials sector down 0.9 per cent.

The metals and mining sector dropped 4.2 per cent. Shares of Baja Mining (TSX:BAJ) lost more than a third of their value after the company said Monday that its Boleo project in Mexico will cost more than expected. It closed 34 cents lower at 57 cents.

Stock markets face another week of uncertainty as traders hone in on economic data to get a sense of whether the U.S. economy is headed for another bout of turbulence.

"We rallied in the first quarter on expectations of good economic news continuing in the U.S. and Europe, and it sort of waned in both of those areas," said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier.

"Most of the positive surprise out of the U.S., in terms of economic statistics and earnings, seem to have waned and we're getting back to neutral territory."

Much of this week's attention will focus towards the U.S. gross domestic product numbers slated to be released on Friday, which should give markets a better sense of direction. Expectations are for 2.5 per cent annualized U.S. GDP, a forecast that has strengthened in recent weeks after consumer spending numbers beat predictions, CIBC Economics said in its weekly outlook.

In corporate news, information services company Thomson Reuters (TSX:TRI) is selling its healthcare business for US$1.25 billion in cash to an affiliate of private equity firm Veritas Capital. The company's shares fell 45 cents to $28.20.

Shares of Canadian Pacific Railway Ltd. (TSX:CP) fell 2.9 per cent after the head of U.S. investment manager Pershing Square Capital Management sent a letter to shareholders saying that the railway company's improved first-quarter results "should not be confounded with 'successful execution'."

Pershing Square, the railway's largest shareholder, is seeking to replace CP chief executive Fred Green with former Canadian National Railway Co. chief executive Hunter Harrison. CP shares ended the session down $2.24 to $74.21.

After the closing bell, Canadian National Railway (TSX:CNR), Canadian Pacific's major competitor, beat analyst forecasts as its profits surged 16 per cent to $775 million in the first quarter. The Montreal-based railway earned $1.75 per share for the period ended March 31, compared to $1.45 per share in the year-ago quarter.

Yukon-Nevada Gold Corp. (TSX:YNG) has increased the reserve estimate for its Jerritt Canyon gold mine complex in Nevada by 48 per cent. The Vancouver-based company said the new estimate is 1.06 million ounces of proven and probable reserves as of Dec. 31, up from 717,000 ounces at the beginning of 2011. Shares in the company fell a penny to 32 cents.

On an otherwise light day for North American economic news, Statistics Canada said wholesale sales rose 1.6 per cent in February to $48.5 billion, following a 1.1 per cent decline in January.

Most subsectors reported higher sales in February, with four of them accounting for about 90 per cent of overall growth.