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TSX weighed by concerns about foreign debt; N.Y. up, bailout program extended

12:39 December 9, 2009, EDT.
(Canadian Press)

TORONTO - The Toronto stock market was little changed in midday trading Wednesday as investors grappled with concerns about foreign debt loads for a second day.

The S&P/TSX composite index declined 22.1 points to 11,346.8 led by falling financials after a 121-point loss Tuesday. However, a weaker U.S. dollar boosted commodities.

The Canadian dollar rose 0.8 of a cent to 94.79 cents US.

Investors nervousness increased after Spain had the outlook on its debt grade lowered by Standard & Poor's.

S&P had already cut Spain from AAA to AA+ in January and said the country will experience a "more prolonged period of economic weakness" than it expected at the start of the year. The outlook was lowered to "negative" from "stable," reflecting "the risk of a downgrade within the next two years."

The S&P announcement followed a warning from Moody's Investor Service that the U.S. and Britain are at risk of having their ratings downgraded if they don't get their finances under control. And Fitch on Tuesday downgraded its rating on Greece.

On Wednesday, Greece's finance minister pledged that the country would not default on its debt obligations.

Moody's also cut the ratings of six Dubai government-linked companies, leaving all in junk status.

"When we get this continued bubbling situation in Dubai and the downgrade of Greece's credit rating, we now realize that it's not necessarily just the U.S. financial system or the European banking financial system but sovereign wealth funds," said Kathryn Del Greco, vice-president and investment adviser at TD Waterhouse private investment advice.

"And these global economies really can remind us that things are not solved yet and there still could be some fallout and some repercussions of the excesses of the previous few years."

Worries about foreign debt helped push the financial sector down 1.05 per cent as Royal Bank (TSX:RY) shed 64 cents to $54.59 and TD Bank (TSX:TD) moved down 95 cents to $65.

Laurentian Bank (TSX:LB) shares gained 40 cents to $42.50 after it said its dividend will be increased by about six per cent following a fourth quarter that included a mixed bag of increased revenue, higher profit and larger provisions for loan losses.

The telecom sector fell almost one per cent as Telus Corp. (TSX:T) lost $1.24 to $34.21.

The gold sector rose 2.3 per cent while the February gold contract in New York gained $2.10 to US$1,145.50 an ounce. Barrick Gold Corp. (TSX:ABX) gained 62 cents to $43.72.

The base metals sector was ahead 0.78 per cent as March copper was ahead two cents at US$3.18 a pound. Teck Resources (TSX:TCK.B) gained $1.35 to $36.19.

First Quantum Minerals Ltd. (TSX:FM) shares fell $2.05 to $74.12 after it said Tuesday it has signed a deal with BHP Billiton to buy the Ravensthorpe nickel operation in Australia for US$340 million. Ravensthorpe was completed in 2007, however operations were suspended in January due to low nickel prices.

The TSX energy sector was up slightly after the U.S. Department of Energy said crude inventories fell 3.8 million barrels last week, against the 600,000 barrel rise that economists had expected.

The January crude contract on the New York Mercantile Exchange rose 68 cents to US$73.30 a barrel. EnCana Corp. (TSX:ECA) rose 52 cents to $29.78 after it said it had received TSX approval to buy and cancel up to 37.5 million of its common shares, about five per cent of the total as of Nov. 30.

The TSX Venture Exchange gained 15.74 points to 1,417.98.

New York markets were slightly higher as U.S. Treasury Secretary Timothy Geithner said that the government would extend its financial bailout program until next fall.

Money from the $700-billion, taxpayer-funded bailout program has helped rescue big Wall Street firms, auto companies and others.

The Dow Jones industrial average rose 29.5 points to 10,315.5 after losing 104 points on Tuesday.

The Nasdaq composite index moved 0.43 of a point higher to 2,173.42. The S&P 500 index climbed 1.8 points to 1,093.75.

In other corporate news, Husky Energy Inc. (TSX:HSE) said Tuesday that it has hit natural gas with an exploration well in the South China Sea. The well on Block 29/26 tested at an equipment restricted rate of 55 million cubic feet per day, the Calgary-based energy company said. Its shares lost 29 cents to $26.95.

New Gold Inc. (TSX:NGD) has failed to get a Mexican court to lift a shutdown order on its Cerro San Pedro gold mine while the Canadian company appeals the suspension order. Mexico's environment ministry, acting on a federal court ruling, revoked the mine's 2006 environmental permit in mid-November. Is shares headed up 13 cents to $3.80.

Earlier, investors in Asia were also rattled by government figures showing that Japan grew far less than originally expected in the third quarter - an annualized rate of 1.3 per cent instead of 4.8 per cent - as cautious companies slashed spending.

Japan's Nikkei 225 stock average fell 1.3 per cent, while Hong Kong's key index shed 1.4 per cent.

London's FTSE 100 index lost 0.29 per cent after the British government announced a one-time tax on bankers' bonuses. The tax will be levied on 2009 bonuses of more than US$40,800. It will be imposed on the pool of bonuses paid by a bank, rather than individual payments and it will be paid by the bank - not the recipient of the bonus.

Treasury chief Alistair Darling said Wednesday it was payback time for banks that lost a combined US$130 billion last year and needed taxpayer-funded bailouts to stabilize the system.

Frankfurt's DAX was off 0.44 per cent and the Paris CAC 40 lost 0.37 per cent.