TORONTO - A steep drop in the financials sector kept the Toronto stock market firmly on negative ground mid-Monday afternoon while data showed the Canadian economy contracting at the end of 2007.
New York markets were weak after reports showed further contraction in the American manufacturing sector and sharply lower construction spending.
Toronto's S&P/TSX composite index fell 68.7 points to 13,513.99 despite runups in energy and mining stocks as investors hope emerging markets will take up the slack from a slowing American economy.
"I think they are looking for other (emerging) markets to pull up their bootstraps and carry on,'' said Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver.
"I think most of those investors want to be optimistic. You can see that.''
The Canadian dollar dipped 0.56 cent to 101.02 cents US after Statistics Canada reported economic output contracted 0.7 per cent in December because of "significant reductions in manufacturing activities, wholesaling and in oil and gas extraction.''
The economy advanced 2.7 per cent for the full year, but fourth-quarter growth slowed dramatically to 0.2 per cent.
The report increased expectations that the Bank of Canada will cut interest rates aggressively Tuesday, when its next decision is announced.
"Given the weaker-than-expected Q4 data, a Canadian dollar currently sitting well above the 98 cent US assumption in the latest monetary policy report update, and that U.S. growth will likely be very weak over the first half of the year, we see the Bank of Canada cutting rates by 50 basis points,'' said RBC economist Rishi Sondhi.
The TSX Venture Exchange ticked 10.08 points higher to 2,792.15.
In New York, the Dow Jones industrial average lost 60.57 points to 12,205.82
The Nasdaq composite index was down 19.99 points to 2,251.49 while the S&P 500 index edged 5.31 points lower to 1,325.32.
The Institute for Supply Management reported that its February manufacturing index registered at 48.3, the weakest reading in nearly five years. And the Commerce Department said construction spending in January took its biggest nosedive in 14 years, plunging 1.7 per cent.
The TSX gold sector gained just over three per cent as bullion crept closer to US$1,000 an ounce. The April bullion contract on the New York Mercantile Exchange closed up $9.20 to US$984.20 an ounce after earlier hitting US$992.
Barrick Gold gained $1.40 to C$52.60 and Kinross Gold Corp. improved $1.31 to $25.66.
Shares in Agnico-Eagle Mines Ltd., a mid-sized gold producer with operations in Quebec, Finland, the U.S. and Mexico, rose $2.13 to $70.13 as it said it has acquired 6.1 million share and half-warrant units of Forum Uranium Corp. in a private placement for $3 million in cash.
Oil prices were also on the rise following comments by a senior Libyan official that the Organization of Petroleum Exporting Countries will hold production levels unchanged this week as it continues to gauge the state of the global economy.
The April crude contract on the Nymex rose $1.24 to US$103.08, taking the TSX energy sector up 0.9 per cent. Suncor Energy rose $2.85 to $104.35 and Talisman Energy gained 27 cents to $17.
Shares in Petrolifera Petroleum Ltd. were off 20 cents at $12.30 after the company said it will restate 2006 results to correct tax reporting. It expects earnings for 2006 to be cut by $2.6 million from the previously reported $39.9 million.
Base metals stocks supported the Toronto market with the mining sector ahead two per cent. Teck Cominco Ltd. ran ahead $2.04 to $41.31 after it said it has completed enough drilling at the recently acquired Quebrada Blanca property in northern Chile to confirm that it contains billions of pounds of copper as well as large amounts of molybdenum.
And HudBay Minerals advanced 85 cents to $19.65 after it announced "encouraging copper and precious metals assays'' at its Lalor Lake zinc exploration project near Snow Lake, Man.
Worries about the credit crisis and the spectre of another round of big writeoffs linked to U.S. mortgages sent the TSX financial sector down more than two per cent.
Bank of Montreal fell $1.53 to $48.17 and Royal Bank retreated $1.44 to $47.95.
The information technology sector also held the TSX back, down two per cent and Research In Motion Ltd. $3.72 poorer to $98.81.
Shares in Rogers Communications Inc. were up 51 to $39.36 after ratings agency DBRS placed the ratings for its notes under review with positive implications. It said the move "follows a period of continued growth in the company's wireless and cable operations and a demonstrably more focused approach to financial management.''
