TORONTO - The Toronto stock market closed lower Monday as sliding oil prices took another bite from energy stocks and a record-breaking loss at Royal Bank of Scotland along with indications of a deeper-than-expected slowdown in Europe prompted investors to sell financials.
"The U.K. and Europe are certainly giving us lots to think about," said Andrew Martyn, portfolio manager at Davis Rea Ltd.
The S&P/TSX composite index pulled back 78.92 points to 8,841.48 on top of last week's two per cent decline.
New York markets were closed for the Martin Luther King holiday while investors will be focused Tuesday on the inauguration of Barack Obama as the 44th president of the United States.
And there are high hopes that the new administration will boost investor confidence -- at least in the short term -- with details of huge stimulus package.
"We're all looking for the Obama bounce," added Martyn, who thinks there will be "some sort of lifting action" between now and mid-March.
"If you look at the technical charts, they say we're in a long term downtrend -- that's obvious. But we are in a strong intermediate snapback that should mechanically carry through to the end of February or March," Martyn said.
"And to the extent we don't get it, it should confirm in my mind that the strength of the downtrend is just so mean that you won't want to hang around for most things until the end of the summer of 2009."
Investor sentiment was negative as the European Union said it is facing a "deep and protracted recession" as a consequence of the world financial crisis.
It said the economies of the 16 countries that use the euro will shrink by 1.9 per cent in 2009, with the entire EU contracting 1.8 per cent.
Meanwhile, European Central Bank president Jean-Claude Trichet says global economic growth this year will be "substantially below" forecasts made only about a month ago.
Trichet said "world and European growth in 2009 will be substantially below the forecasts made at the beginning of December."
A day before the Bank of Canada is widely expected to cut its main interest rate half a point to one per cent, the Canadian dollar fell 0.43 of a cent to 79.7 cents US.
The TSX Venture Exchange added 7.3 points to 872.95.
The federal government announced moves to loosen credit, with Industry Minister Tony Clement saying the federal government will invest $350 million in the Business Development Bank to ease credit conditions for auto supply companies and other small and medium-sized businesses.
The TSX energy sector moved off 1.75 per cent. The New York Mercantile Exchange is closed for floor trading but in electronic trading the February crude contract, which expires Tuesday, declined $1.91 to US$34.60 late in the afternoon. The March contract gave back $1.69 to US$40.88 a barrel.
EnCana Corp. (TSX:ECA) declined $1.01 to C$55.72 while Canadian Natural Resources (TSX:CNQ) lost $1.16 to $47.38.
Suncor Inc. (TSX:SU), which releases quarterly earnings Tuesday, was down $1.22 to $26.26.
Shares in industrial waste management services provider Newalta Inc. (TSX:NAL) declined seven cents to $5.91 after it said its capital expenditure in the first half of 2009 will be $15 million, compared with $125 million in all of 2008. Newalta is heavily dependent on the oil and gas industry in Western Canada.
The financial sector sagged 1.5 per cent as Royal Bank of Scotland said that its losses for last year could reach 28 billion pounds or US$41.3 billion -- the biggest ever for a British corporation.
The bank said profits in retail and commercial business in Britain had been wiped out by losses in its global banking and markets division and its stock plunged 67 per cent.
Also, the British government revealed a second bailout plan for its ailing banks. The new plan would require banks to identify their riskiest assets and would allow them to pay a fee to insure them with the government. By offering to insure bank loans, the government is exposing taxpayers to billions of pounds of potential losses.
On the TSX, TD Bank (TSX:TD) dropped $1.48 to $42.22 while Royal Bank (TSX:RY) slid $1.04 to $32.60 after hitting a new 52-week low of $32.17.
Telecoms were a bright spot, up 1.65 per cent with Telus Corp. (TSX:T) ahead $1.36 to $36.66 while Rogers Communications (TSX:RCI.B) advanced 44 cents to $33.99.
Bombardier Inc. (TSX:BBD.B) shares advanced 21 cents to $4.94 after it said its transportation division will continue to operate the Las Vegas monorail that shuttles passengers along the east side of the city's famed strip. Its Berlin-based railway equipment division has received a five-year option order from the Las Vegas Monorail Company valued at US$58 million.
Canadian National Railways (TSX:CNR), which reports earnings on Thursday, declined 53 cents to $42.
SFK Pulp Fund (TSX:SFK.UN) units retreated 23 cents or 32 per cent to 49 cents after it suspended monthly distributions "until market conditions substantially improve." The company also extended quarterly maintenance shutdowns at two U.S. recycling mills by one and two weeks.
