At the open: Plunging potash shares drag TSX lower

TORONTO — The Canadian Press

Potash Corp's head office in Saskatoon is pictured in this file photo from Nov. 3, 2010. (DAVID STOBBE/REUTERS)

The Toronto stock market was sharply lower Tuesday amid plunging shares of big potash producers after a Russian-based rival broke up a European marketing group that controls about 43 per cent of global exports.

The S&P/TSX composite index fell 100.38 points to 12,568.66.

Russia’s OAO Uralkali plans to run at full capacity after changing its trading policy in a move that signals prices will weaken.

Story continues below ad

Chief executive Vladislav Baumgertner said that the change in the company’s trading policy could take potash prices to less than $300 (U.S.) a ton, which is at least 25 per cent below the current contract price for China.

Shares in the rival Canpotex Ltd. potash marketing group were down sharply, as Potash Corp. of Saskatchewan Inc., the most active TSX stock, plunged $8.95 or 23 per cent to $29.95, shares in Agrium Inc. dropped $6.11 or 6.5 per cent to $87.73, while in New York, Mosaic Co. tumbled $12.93 or 24.3 per cent to $40.28 (U.S.).

Traders also considered a run of earnings reports from Canadian and U.S. firms.

The Canadian dollar slipped 0.04 of a cent to 97.43 cents U.S.

U.S. indexes were higher amid strong housing price data.

The Dow Jones industrial index gained 44.02 points to 15,565.99, the Nasdaq climbed 12.18 points to 3,611.32 while the S&P 500 index rose 4.89 points to 1,690.22.

U.S. home prices jumped 12.2 per cent in May compared with a year ago, the biggest yearly gain since March, 2006. The Standard & Poor’s/Case-Shiller 20-city home price index also surged 2.4 per cent in May from April, nearly matching the previous monthly gain of 2.6 per cent, the highest on record.

Later in the morning, the New York-based Conference Board releases its U.S. consumer-confidence index for July. The consensus calls for the index to come in at 81, down slightly from 81.4 in June, which was the highest level in more than five years.

The base metals sector was also a weight on the TSX, down 1 per cent, while the September copper contract on the Nymex moved down 5 cents to $3.06 (U.S.) a pound. Teck Resources Ltd. fell 27 cents to $24.43 (Canadian).

Turquoise Hill Resources fell 31 cents, or 7.1 per cent, to a new 52-week low of $4.07. The stock fell 20 per cent Monday as it said it’s expecting a delay in developing its Oyu Tolgoi copper project in Mongolia due to the government’s financing process. Turquoise Hill’s primary operation is its 66-per-cent interest in the Oyu Tolgoi copper-gold-silver mine.

The August gold contract fell $3.70 to $1,324.70 (U.S.) an ounce and the gold sector fell 0.85 per cent. Barrick Gold Corp. fell 36 cents to $17.73 (Canadian).

The price of oil fell below $104 a barrel on Tuesday as traders await key data later in the week, including the latest reading on U.S. economic growth and job creation.

The September crude contract on the New York Mercantile Exchange fell 85 cents to $103.70 (U.S.) a barrel. Enerplus Corp. gained 18 cents to $16.86 (Canadian).

Traders also waited for the Federal Reserve to give its latest appraisal of the U.S. economy and whether a change to the central bank’s stimulus strategy is warranted. Fed officials are meeting Tuesday and Wednesday in Washington.

The Fed has been buying $85-billion of financial assets a month, a move that has kept long-term borrowing rates low and fuelled a rally on stock markets. However, the Fed is widely expected to wind down the program later this year if the economy improves.

On the earnings front, Thomson Reuters Corp. says its adjusted earnings for the latest quarter was 48 cents a share, which beat analyst estimates. But its shares were down 56 cents to $35.81.

WestJet Airlines Ltd. says it earned net income of $44.7-million in the second quarter, or 34 cents per diluted share, a penny higher than analyst estimates. That compared to $42.5-million, or 31 cents per share, a year ago. Revenue came in at $843.69-million, an increase from $809.28-million a year ago but below an analyst estimate of $860.7-million and its shares slipped 36 cents to $19.77.

In the U.S., drugmaker Pfizer Inc. said its second-quarter net income more than quadrupled, helped by the sale of its animal health business. The world’s second-largest drug company, which makes Viagra, along with the pain medicines Lyrica and Celebrex, earned $14.1-billion, or $1.98 per share. That compares with $3.25-billion, or 43 cents per share, a year earlier. Earnings ex-items were 56 cents a share, a penny better than expected and its shares gained 46 cents to $30 (U.S.).

In other corporate news, TD Bank Group says it expects recent severe flooding in Alberta and the Toronto area will cause a loss in its insurance business in the third quarter. It says TD Insurance faces an after-tax net loss of between $240-million to $290-million (Canadian) for the period, which includes the months of June and July. TD fell 89 cents to $88.

Earlier in Asia, Tokyo’s Nikkei 225 index closed 1.5 per cent higher despite a drop in industrial output for June. The Economy Ministry said manufacturing slipped 3.3 per cent from the month before in June and was 4.8 per cent lower than a year before.

Elsewhere in Asia, South Korea’s Kospi advanced 0.9 per cent while Hong Kong’s Hang Seng added 0.5 per cent.

European bourses advanced with London’s FTSE 100 index ahead 0.18 per cent, Frankfurt’s DAX rose 0.31 per cent and the Paris CAC 40 advanced 0.6 per cent.