TSX sees sharp sell-off on slowing global growth, Spain unveils bank audit
Toronto's main market sunk more than 233 points in early afternoon trading Thursday as commodity prices tanked on reports around the globe of slowing economic growth, while Spanish banks just announced an audit that shows the country's banks may need up to 62 billion euros in a worst case scenario.
The S&P/TSX Composite Index was down 233.64 points or 1.99%, to 11,525.70 as of 1:00 pm ET, while the more junior S&P/TSX Venture Composite was lately lower by 28.86 points, or 2.3%, to 1,225.71.
Stress tests of Spanish banks carried out by two independent auditors showed aggregate capital needs for financial institutions in a worst case scenario of between €51.8 billion and €62 billion. The audits were carried out by consulting firms Oliver Wyman and Roland Berger.
The required funds are well below the up to €100 billion in loans the Spanish government requested earlier this month from the European Union for its banking sector. Officials reportedly said a formal request for the loan would come within days.
Meanwhile, Chinese manufacturing fell to a seven-month low - a sign that factories there are being hit by sluggish demand, according to the preliminary report of HSBC Manufacturing Purchasing Managers' Index.
And Europe's PMI index for June remained near a three-year low, as manufacturing output in Germany -- the most important European economy -- fell at the fastest rate in three years. It was the second straight month of decline.
In Toronto, energy, metals and mining stocks, and materials led the losses. Financials were also down by over 1%.
Commodities were deep in the red, with gold for August delivery lower by $44.9 to $1,570.90 an ounce, and crude oil for July down $2.14 to $79.3 a barrel.
Silver futures fell 4.9% to $26.98 an ounce, while the base metal copper contract shed 8.8 cents to $3.3 a pound.
Declines in materials were led by Canickel Mining Limited (TSE:CML), down by 25%, Kinross Gold (TSE:K), which fell 2.31%, and IAMGOLD Corp (TSE:IMG), off by 3.36%.
Copper heavyweight Teck Resources (TSE:TCK.B) was down 2.46%.
In energy, Niko Resources (TSE:NKO) plummeted over 36%, a day after the company announced a reduction to its reserves.
Encana Corp (TSE:ECA) dropped 7.41%, alongside Suncor Energy (TSE:SU), which fell 3.98%, and Canadian Natural Resources (TSE:CNQ), which was down 3.11%.
Financials were also lower with insurer Manulife Financial (TSE:MFC) in the red by 1.07% and Royal Bank of Canada (TSE:RY) down 1.32%.
In corporate news, INV Metals Inc. (TSE:INV) Thursday agreed to acquire the Quimsacocha Project in Ecuador from IAMGOLD Corp. (TSE:IMG) (NYSE:IAG) for approximately $30 million in INV stock. This will make IAMGOLD the largest shareholder in INV with a 20 percent stake.
Encana Corp. said it will invest an additional $600 million this year — on top of its original $2.9-billion budget — to increase production of liquids-rich natural gas.
CIBC (TSE:CM) said it could not find an acceptable buyer for its FirstLine Mortgage business, which it has been trying to sell since March. The Canadian bank decided to wind up operations of the unit.
Alimentation Couche-Tard (TSE:ATD.B) said it plans to expand Statoil Fuel & Retail's reach to new markets in Europe after its purchase of the Norwegian company.
On the economic front, Statistics Canada said this morning that retail sales swooned 0.5% in April. In volume terms, retail sales decreased 0.8%, the third decline in four months.
On the brighter side, those receiving regular Employment Insurance benefits decreased for the third straight month in April, down 28,600, or 5.3%, to 513,700.
Federal Finance Minister Jim Flaherty also announced that mortgage rules would be tightened for the fourth time in as many years. Rules will see the level people can borrow against their house drop to 80% from 85% and while the amortization period will be lowered to 25 years from 30 years.
US/Europe
US markets were also impacted by a sell-off Thursday afternoon on disappointing global growth news.
At home, the Labour Department said that there were 387,000 first-time filings for unemployment benefits in the week that ended June 16, little changed for the prior week but slightly higher than the forecast of 380,000, according to Briefing.com.
The Federal Reserve Bank of Philadelphia’s economic index also showed the worst contraction in manufacturing in almost a year of 16.6%, while other reports showed existing home sales decreased more than forecast.
The Dow was lately down 1.2%, or more than 150 points, while the Nasdaq and S&P 500 saw slightly wider percentage losses.
The Federal Reserve decided yesterday to extend its bond buying policy Operation Twist through to the end of the year. But the move fell short of some investor calls for another round of quantitative easing.
Thursday, eurozone finance ministers are gathering in Luxembourg for a two-day summit aimed at discussions on how to bring the eurozone closer together, and at tackling the debt crisis in the region.
Spain yields on 2-year bonds doubled from the prior auction, while yields for 5-year and 7-year bonds also rose sharply. However, the 10-year benchmark fell to 6.5% from highs of over 7% earlier this week.
In US corporate news, Federal Signal Corporation (NYSE: FSS) announced Thursday it has signed a definitive agreement to sell its transportation technologies business to 3M (NYSE: MMM) for $110 million in cash, in an effort to reduce debt.
Sun Healthcare Group, Inc.’s (NASDAQ:SUNH) stock rose just above 36.16 per cent in heavy morning trade after it agreed to be taken over by Genesis HealthCare in a $275 million deal.
Rite Aid Corp. (NYSE:RAD) Thursday posted a first-quarter net loss of $28.1 million or $0.03 per share against a loss of $63.1 million or $0.07 per share. Revenues rose to $6.5 billion from $6.4 billion a year earlier.
Used and new car retailer CarMax (NYSE:KMX) said fiscal first-quarter profit slipped amid lower margins and fewer new vehicles sold as it narrowly missed analyst expectations.
Business software provider Red Hat (NYSE:RHT) reported late Wednesday that fiscal first-quarter profit grew 15.4 per cent amid higher sales and margins, despite sharply higher operating costs.
Micron Technology (NASDAQ:MU) late Wednesday dipped into the red in the third quarter as an increase in memory chip prices was not enough to make up for weak profit margins from its flash memory products.
Bed Bath & Beyond (NASDAQ:BBBY) late Wednesday posted a 15 per cent increase in profits that beat the Street as same-store sales and revenue continued to rise for the home furnishings retailer.
The stock dropped over 15 per cent, however, as the company predicted downbeat second-quarter earnings and saw its margins slide.
Global tobacco company Philip Morris International (NYSE:PM) Thursday lowered its fiscal 2012 earnings forecast for the second time this year due to the strengthening US dollar.
The 10-cent decrease to between $5.10 and $5.20 a share follows a five-cent decrease in April. This compares with earnings of $4.85 in 2011.
Global specialty chemicals company Cabot Corp (NYSE:CBT) said Thursday it has struck a deal with Doughty Hanson & Co. and Euroland Investments B.V. to purchase activated carbon product maker Norit, for $1.1 billion, in an effort to focus on higher margin and less cyclical business.
European markets finished lower today with shares in Britain leading the region. The FTSE 100 was down 0.99% while Germany's DAX was off 0.77% and France's CAC 40 was lower by 0.24%.
