The Toronto stock market was lower Monday, with commodity stocks the leading losers as the U.S. dollar continued to gain strength amid persistent worries about the ability of Greece to repay its debt.
“It’s a big issue for sure,” said Steve Uzielli, portfolio manager-director ScotiaMcLeod equity advisory. “Until there is resolution on this issue, it will continue to be one of many shadows over the market.
The S&P/TSX composite index was well off early lows late in the morning as losses in the energy and mining sectors moderated. But the main index was still down 28 points at 11,920. The TSX Venture Exchange was 12.71 points lower at 1,551.35.
The Greek debt crisis continued to attract investor attention after Germany’s chancellor said Sunday that a bailout for Greece won’t be discussed at a European summit this week. Greece has said in recent days that if other European countries do not provide support, it might turn to the International Monetary Fund for help.
Investors are worried about the effect on the global economic recovery if Greece and some other European countries that use the euro – such as Spain and Portugal – falter in their struggle to pay down their heavy debt.
The Canadian dollar lost ground as the U.S. dollar attracted nervous traders and gained strength against a number of currencies. The loonie was down 0.34 of a US cent to 98.05 cents US.
Commodity prices also wilted under the weight of a stronger greenback.
“U.S. dollar strength typically leads to lower commodity prices and that’s what we’re seeing today,” said Uzielli, pointing out that such a rise is “a relative measure.”
“The U.S. has its own issues (but) when compared to the European situation, and the uncertainty there, all of a sudden the U.S. dollar looks like a safe haven in relative terms.”
The April crude contract on the New York Mercantile Exchange fell 38 cents to US$80.30 a barrel. The energy sector moved back 0.6 per cent and Canadian Natural Resources (TSX:CNQ) shed 54 cents to C$72.71.
The tepid performance in the energy sector came amid a report from the Conference Board of Canada predicting profits in the natural gas sector will increase in 2010. It added that higher prices will offset lower production. Nexen Inc. (TSX:NXY) moved down 10 cents to $24.31.
The base metals sector was the leading Toronto decliner, down almost one per cent as May copper lost two cents to US$3.35 a pound. Sherritt International (TSX:S) fell 27 cents to C$8.43 and First Quantum Minerals (TSX:FM) fell $2.92 to C$86.36.
The gold sector faded one per cent with the April gold contract on the New York Mercantile Exchange down $11 to US$1,096.60 an ounce. Goldcorp Inc. (TSX:G) was off 39 cents at C$39.06.
Financials were also a drag on the TSX, with selling focused on insurers. Manulife Financial (TSX:MFC) was down 39 cents at $19.75 while Sun Life (TSX:SLF) declined 31 cents to $31.63.
The telecom sector was up 0.4 per cent with the Canadian Radio-television and Telecommunications Commission set to rule Monday on the so-called TV tax or fee for carriage. Cable companies say such a fee could add $10 a month to consumers’ bills if the regulator rules they have to pay broadcasters for their local signals. The decision is expected after the market close. Telus Corp. was the big gainer, up 40 cents at $36.88.
The picture was more positive in New York, where markets are not nearly as commodity-heavy as the TSX.
The Dow Jones industrial average was up 40.3 points to 10,782.3.
The Nasdaq composite index edged up 12.67 points to 2,387.08 while the S&P 500 index added 3.5 points to 1,163.4.
The health-care sector was one of the leading advancers on the NYSE following the passage of a sweeping package of U.S. health-care legislation over the weekend which will create near-universal medical coverage and extend benefits to 32 million currently uninsured Americans.
Pfizer gained 32 cents to US$17.23 while Merck improved 78 cents to US$38.84.
Further weighing on investor sentiment Monday was the move by India’s central bank on Friday to raise interest rates. The quarter-point hike, intended to cool high inflation, unnerved investors who were concerned that growth and asset prices could sink once governments start winding down their stimulus measures.
The move by the Indian government to curb the economy comes at a time when the Chinese government has also made moves to slow down a hot economy, raising the reserve levels of banks.
“If those are the global economic growth engines and there are efforts being made to curb that growth, that obviously has implications for the global economy and producers of commodities for that global economy and that brings you back to Canada as well,” Uzielli said.
Stocks in Asia were down on the Greek uncertainty and the India rate hike, with Hong Kong’s Hang Seng plunging 2.1 per cent. Japanese markets were closed for a national holiday. Australia’s market fell 0.9 per cent and India’s Sensex dropped 0.7 per cent.
London’s FTSE 100 index fell 0.28 per cent, Frankfurt’s DAX lost 0.09 per cent while the Paris CAC 40 dropped 0.12 per cent.
In corporate news, the founder of Biovail Corp (TSX:BVF), Eugene Melnyk, has sold “substantially all” of his holdings in the Toronto-area pharmaceutical company.
According to a regulatory filing with the U.S. Securities and Exchange Commission, Melnyk has sold about 9.6 million Biovail shares since Nov. 24. At that time, the stock stood at $14.99. On Monday, Biovail shares were up 31 cents at $16.42. Melnyk left Biovail several years ago and has been often at odds with its management and board of directors about Biovail’s strategy.
Osisko Mining Corp. (TSX:OSK) plans to acquire Hammond Reef gold project in Ontario through a takeover of Brett Resources Inc. of Vancouver (TSXV:BBR) in an all-stock deal valued at $372 million. Osisko stock was down 23 cents at $8.36.
