Gold Falls,Global markets declined in light volumes on Wednesday

Global markets declined in light volumes on Wednesday, as the price of gold fell and a report showed eurozone banks were hoarding cash from the European Central Bank instead of recirculating it through loans.

In Toronto, the benchmark S&P/TSX composite index fell 198.26 points, or 1.66%, to 11,728.41. Nine of the 10 sub-indexes declined, led by materials, down 4.22%, and energy, which fell 1.62%.

The price of crude oil fell US$1.98 to US$99.36 a barrel as investors were reassured that even if Iran did block the Strait of Hormuz to oil shipments as it has threatened, the situation would not last long enough to cause real shortages. The price of gold dropped for the fifth straight session - its longest slump since October 2009 - closing at US$1,562.90 an ounce, a loss of US$31.30. It has fallen in 10 of the last 12 sessions. "As a hiding place, it served its purpose," Bob Decker, a money manager at Aurion Capital in Toronto, said of gold. "As people look to the new year with a little more optimism with regard to the U.S. economy, maybe they're taking profits in their winning trades."

Profit-taking - and getting the house in order as the year ends - explained much of the declines on the markets, which came back from the Christmas holiday on Tuesday and in Canada on Wednesday.

"Volume goes light and really the only things that are left are the hedge funds making sure that they're in good shape for year-end and a lot of them have to sell to cover their losses," John Kinsey, portfolio manager at Caldwell Securities, said.

"The other part of it is the windowdressing," he said. "This is the most important quarter for window-dressing because it's obviously the end of the year for most mutual funds and other corporations and so they all sell their losers and that puts pressure on the market."

The Canadian dollar fell 33 basis points to US97.64¢ on Wednesday as the U.S. dollar advanced.

Also a factor on Wednesday were reports that eurozone banks were sitting on cash from the ECB. "If the eurozone banks are too afraid to lend, that does not bode well for future growth in the region," Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, told Bloomberg. "The banks are not borrowing from the ECB in order to spur lending. It's to shore up their own balance sheets. That could lead to a credit contraction in the eurozone."

The Dow Jones industrial average fell 139.94 points, or 1.14%, to 12,151.41 and the Nasdaq composite slipped 35.22 points, or 1.34%, to 2,589.98. Canada's junior Venture exchange dropped 18.60 points, or 1.27%, to 1,451.08.

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The chase by Noah Zivitz:

Where do we start?
Crude oil continues to hover above $100 per barrel, after settling at its highest level since mid-November, on the heels of renewed threats from Iran about shutting the Strait of Hormuz. Let’s continue to probe the stakes for international diplomats tasked with watching over Tehran’s nuclear strategy, while also keeping oil flowing through the strait. And after seeing U.S. consumer confidence rise yesterday to heights unseen since April, let’s try to quantify the psychological impact of $100+ oil.

Italy’s short-term borrowing costs were cut in half in a $12B debt auction today. The next test comes Thursday, when Rome seeks to raise $11B in longer-term debt. Let’s hear about the sustainability of demand for Italian bonds, and how much of that demand comes from banks basking in cheap cash, courtesy of the ECB.

Those look like the biggies. But we’ve got plenty more to sift through:
Athabasca Oil Sands has received full regulatory approval for its Mackay River oil sands project, with construction slated to start next month. This is a 40/60 joint-venture with PetroChina, and forces us to ask (once again) about labour constraints in the Canada’s energy hub.

Fresh off the wires, Ruggedcom just announced a poison pill to give itself plenty of time to consider options after Belden recently disclosed its plan for an unsolicited takeover offer. Paul Bagnell will give this one a look, and I’d like to find out whether other bidders could line up for Ruggedcom. We’ll chase the company.

Bombardier provides the other notable Canadian corporate story thus far today, with a $300-million rail contract in London. We’ll be peering into the company’s order book today as it prepares for a critical year in the evolution of its CSeries jet.

There's still a story to be told after Sears Holdings yesterday showed the wear and tear of a hyper-competitive retail sector. In case you missed it, SHLD disclosed a plan to close up to 120 stores, and said it will "carefully evaluate store performance going forward and act opportunistically to recognize value from poor performing stores as circumstances allow." In other words, CEO Lou D'Ambrosio has more work to do. As we return to our desks and have our first chance to do a holiday shopping debrief, I want to hear what the winning strategies have been, and whether Sears Holdings will regain its footing.

The U.S. Treasury Department dodged fireworks with Beijing after it declined to label China a currency manipulator in its report to Congress late yesterday. Even so, it's giving China a nudge, saying RMB movement thus far is insufficient -- and plans to press for policy moves that will inject some more flexibility into the currency. How long will the U.S. wait before using the m-word, and how detrimental is China's currency strategy to global economic rebalancing? We’ll bring it up with Stewart Hall at 9:35.

Barack Obama is going the bipartisan route with his latest nominations to the Federal Reserve’s board of governors. Possibly in a bid to facilitate the Senate approval process, U.S. President Obama is offering up a Republican, Jerome Powell, as a nominee alongside Democrat Jeremy Stein. Powell has quite the résumé, having worked in the Treasury Department during George H W Bush’s presidency. Powell also spent time as a partner at Carlyle Group. We’ll be familiarizing ourselves with Powell and Stein in the lead-up to their nomination hearings.

An unnamed U.S. Treasury Department official yesterday said the White House will be asking for a $1.2-trillion debt ceiling boost before the end of the week. It looks like this request for extra borrowing power will be far more routine than the downgrade-inducing showdown in August.

It’s as good a day as any to explore supply and demand for rare earths, after China unveiled a full-year export quota for 2012 that looks essentially unchanged from 2011 – but there’s more to the story than the headline.

The quota covering the first half of the year is being sliced by 27%. Let’s find someone who can help us understand China’s export strategy, and how buyers are adapting.

Supreme Court to rule on securities regulator

Supreme Court to rule on securities regulator
The chase by Marty Cej:

Our top story today is the Supreme Court of Canada's decision on whether the government can proceed with plans to create a single securities regulator for the country. The plan, which has scandalized regional regulators in Alberta and Quebec (a single regulator? Next thing you know people will be allowed to marry their pets!!), would establish the Canadian Securities Regulatory Authority (CSRA), targeted to begin operations by the end of 2013. The push for a national regulator gained significant momentum with the financial crisis but the debate began decades ago. The Feds argue that a single regulator will provide more consistent protection for investors across Canada, improve regulator and criminal enforcement, create new tools to support the stability of the Canadian financial system, faster policy response, simpler and cheaper processes for businesses and investors and more effective international representation and influence for Canada. Canada remains the only country in the G7 without a single regulator. The provincial holdouts' argument goes something like this: That's what you say.
Today's decision will affect companies, institutions, investors, traders and analysts at home and abroad. A decision that allows the government to proceed will put into motion a process that will bring Canada into line with global standards but will also cause great consternation and worry for many people working at regional regulators now. Will regional expertise be sacrificed in the transition? Is regional expertise of any value in the first place? What will the next steps be for the holdouts in the event of a ruling in the government's favour? And what would the government's next steps be if the court rules against? The decision comes down at 9:45 a.m. ET. Our analysis begins with the Street.
Among our guests on this key Canadian story today are Tom Hockin, Executive Director for the IMF representing Canada; Ermanno Pascutto, Executive Director of FAIR Canada and Ian Russell, Executive Director of the Investment Industry Association of Canada. We are also expecting to hear from Finance Minister Jim Flaherty after the decision.
Today also sees the unveiling of BNN's Newsmaker of the Year. Beginning at 11:00 a.m. ET, we'll count down the stories that mattered most to Canadian investors to No. 1. What were the biggest deals? The biggest blunders? The boldest coups? The toughest calls and flimsiest strategies?
Speaking of strategy, Thomson Reuters said a few moments ago that it has suspended its attempt to sell its healthcare business. The company put the unit up for sale back in June, but says the "global economic conditions have become more challenging and the company believes they are not conducive to concluding a transaction that reflects the fair value of the Healthcare business at this time." This is a big important company that is in turmoil and struggling to find its feet again after a period of remarkable internal upheaval.
Yahoo will be a stock to watch amid speculation the company is poised to sell a big chunk of its holding in Alibaba Group.

ECB rolls out cheap money

The chase by Marty Cej:

European stocks are mostly higher and U.S. stock index futures are pointing to early gains after the European Central Bank said it will lend the region's banks a record 489 billion euros for three years, almost double expectations. The loans, at a sporty 1 percent (at these prices, you'd be crazy not to borrow!), provide Europe's cash-strapped banks with plenty of liquidity for the foreseeable future and should bolster confidence in the European financial industry, economy and the ECB's commitment to stability. In the simplest terms, European banks can borrow from the ECB at 1 percent and lend to companies, consumers and governments at much higher rates, pocketing the difference. Yes, Virginia, the ECB is a central bank. The true test of the efficacy of the ECB's plan, however, is not the demand from the banks but the demand from the banks' customers.

With just a few trading days left before the New Year, time has all but run out for a Santa rally. So far this month, the S&P/TSX Composite is down 4 percent, the S&P 500 down 0.45 percent and the Dow Jones Industrial Average up a measly 0.48 percent. Volume is low, tax-loss selling is picking up and many of the headwinds that buffeted financial markets through 2011 continue to blow.

There is still plenty of time left this year for us to label and list the challenges and opportunities investors will face in 2012. Yesterday's conversation with economist Joel Naroff was an excellent example. One of the most accurate forecasters for the U.S. economy in recent years, he surprised us when he argued that the world's largest economy will grow much more briskly next year than most economists and investors expect. Outliers… I love 'em.
Speaking of outliers, Edward Zarbitsky at ACI Research is the only analyst

anywhere who has a 'sell' recommendation on Apple stock. He joins us at 10:00 a.m. ET.
The market is talking about Research In Motion today after Reuters reported late yesterday the company rebuffed talks with Amazon that could have led to an offer. Citing unnamed sources, Reuters reported that Amazon hired an investment bank to kick the tires but RIM executives decided to fix its own problems rather than court outsiders. The Wall Street Journal followed with a story of its own -- again citing unnamed sources -- that Microsoft and Nokia considered a joint bid for the BlackBerry maker.

No matter how flimsy the speculation -- who hasn't spit-balled a bid for RIM this year over their third dirty martini at a wood-paneled pub with the word "Olde" in its name?? -- the stock rallied as much as 10 percent overseas and is higher in the pre-market. We've contacted all the principals, none of whom comment on market speculation, and will continue to test the logic of the potential tie-ups that have been proposed.

The tech sector will be a busy on today after Oracle reported after the close of trading last night. The world's second-biggest software maker missed both revenue and profit expectations and said that customers are taking longer to assess and close deals. That level of caution among companies can tell us plenty about the software and hardware industries, as well as the broader economy. The Oracle story today is bigger than Oracle.

The TMX Group said a few minutes ago that it has purchased a 16 percent stake in the Bermuda Stock Exchange, scoring a seat for TMX CEO Tom Kloet on the BSX board and some choice tee times. The TMX says the deal "represents TMX Group's commitment to looking beyond Canada for opportunities."

While that is true, I'm curious just how big an opportunity the BSX provides. It's not exactly the Hong Kong Stock Exchange. We expect to have a conversation with the CEO of the BSX later this morning.