The Toronto stock market was lower as telecom stocks dropped sharply amid a report of a potential new player in the Canadian wireless sector while gold miners were pressured as bullion prices retreated to three-year lows.
The S&P/TSX composite index lost 27.55 points to 11,977.87.
The telecom sector led decliners, down 6.5 per cent after The Globe and Mail reported that Verizon Communications Inc. has made an initial offer for Wind Mobile and is starting talks with Mobilicity, two of Canada’s smaller wireless network operators.
Two people familiar with the situation told The Globe that Verizon’s initial offer for Wind is worth about $700-million.
Telus Corp. dropped $3.37 or 10.1 per cent to $30, Rogers Communications fell $4.14 or nine per cent to $41.75 while BCE Inc. gave back $2.10 or 4.85 per cent to $41.22.
The Canadian dollar was up 0.42 of a cent to 95.58 cents US as the U.S. dollar weakened following the release of data showing U.S. growth in the first quarter wasn’t as robust as previously thought.
The loonie has been hit with a series of losses recently because of a U.S. dollar that has strengthened on indications that the U.S. Federal Reserve looks set to ease up on its bond purchase program.
U.S. markets also advanced as the Dow Jones industrial futures gained 125.05 points to 14,885.36 as the U.S. Commerce Department said it now estimates U.S. gross domestic product grew at an annualized rate of only 1.8 per cent. That is down sharply from the previous reading of 2.4 per cent but still stronger than in the fourth quarter.
The steep revision was mostly because consumers spent less, suggesting higher taxes are having a deeper impact on economic growth.
However, analysts thought that performance should improve later in the year.
“Beyond mid-year we expect the restraining effect from fiscal policy to wane allowing growth to strengthen closer to three per cent over the final two quarters of this year,” said RBC assistant chief economist Paul Ferley.
“Growth at this pace offers the prospect of putting sustained downward pressure on the unemployment rate. Such is consistent with the Fed starting to reduce its asset purchases in the final quarter of this year and ceasing these purchases altogether by mid-2014.”
The Nasdaq was up 28.79 points to 3,376.68 while the S&P 500 index advanced 14.26 points to 1,602.29.
Both Toronto and New York indexes registered triple-digit gains Tuesday on strong U.S. economic data and comments by China’s central bank that eased fears of a credit crunch in the world’s second-biggest economy.
China’s central bank caused a global rout in markets on Monday after it moved to curb so-called shadow banking – unregulated lending to companies starved of credit by traditional banks. Investors worried that would cause an increase in borrowing rates for companies, hurting business. On Tuesday, the central bank issued a statement saying it would act to keep credit markets functioning, if needed.
On the TSX, the gold sector lost 4.55 per cent as speculation over what the Fed will do in tapering its $85-billion a month in bond purchases continued to pummel gold prices and the August contract fell $35.30 to $1,239.80 an ounce after earlier falling to a three year low of $1,223.20. Barrick Gold fell 89 cents to C$16.02.
Fed chairman Ben Bernanke said last week that the pace of bond buying could slow later this year as long as economic data shows continued improvement. A string of solid economic data released Tuesday on manufacturing, housing and consumer sentiment has further reinforced the view that the central bank is ready to act and could wind up the program by next year.
The TSX gold sector is by far the worst performer on the Toronto market, down 46 per cent so far this year. Share prices in gold miners were already feeling pressure as bottom lines were hit by rising costs. But gold prices have deteriorated steadily this year as the precious metal loses its appeal as a hedge against inflation and deteriorating currencies.
Other commodities were lower with the energy sector little changed as the August crude contract on the New York Mercantile Exchange off 25 cents to $95.07 a barrel.
The base metals sector was up 0.24 per cent with July copper unchanged at $3.07 a pound. Teck Resources dropped 21 cents to $22.15.
The consumer staples sector was the strongest component, up one per cent as grocer Loblaw Cos. rose 62 cents to $47.39.
Earlier in Asia, the Shanghai Composite Index fell 0.4 per cent but the smaller Shenzhen Composite Index jumped 2.5 per cent while in Hong Kong, the Hang Seng surged 2.4 per cent.
Japan’s Nikkei 225 fell one per cent, South Korea’s Kospi reversed early losses to rise 0.2 per cent and Australia’s S&P/ASX 200 gained 1.6 per cent.
European bourses were also higher with London’s FTSE 100 index up 0.95 per cent, Frankfurt’s DAX gained 1.66 per cent and the Paris CAC 40 advanced 1.85 per cent.Report Typo/Error