The Toronto stock market was lower Thursday amid concerns about the role of central banks in supporting the economic recovery and a forecast of lower-than-expected growth by the World Bank.
The S&P/TSX composite index lost 43.44 points to 12,066.45, its latest in a string of declines, while the Canadian dollar was ahead 0.48 of a cent to 98.4 cents US amid lower commodity prices.
U.S. indexes were also in the red amid positive readings on retail sales and claims for jobless benefits as the Dow Jones industrials shed 15.61 points to 14,979.62. The Nasdaq declined 3.41 points to 3,397.02 while the S&P 500 index was off 1.19 points to 1,611.33.
The U.S. Commerce Department said that retail sales increased 0.6 per cent in May from April. That’s up from a 0.1 per cent gain the previous month and the fastest pace since February. The gain shows consumers remain resilient despite higher taxes and could drive faster growth later this year.
The April gain was led by a 1.8 per cent jump in auto sales, the biggest increase in six months.
And the number of Americans seeking unemployment benefits dropped 12,000 to a seasonally adjusted 334,000 last week. The four-week average, a less volatile measure, decreased 7,250 to 345,250. Applications are a proxy for layoffs Central bank worries had also pushed Toronto and New York markets lower Wednesday as the TSX fell 114 points – its eighth loss in nine sessions – and the Dow fell 127 points.
Worries about central banks have been growing ever since Federal Reserve chief Ben Bernanke said on May 22 that the Fed might pull back on its $85-billion-a-month bond-buying program, known as quantitative easing, if economic data improves, especially hiring.
The QE program has fuelled a strong rally on U.S. markets.
Now Japanese media reports are saying overseas hedge funds may be dumping the country’s equities following disappointment over the Bank of Japan’s decision earlier in the week to refrain from additional monetary easing measures.
Those reports helped send Tokyo’s Nikkei 225 index plunging 6.4 per cent, while the yen strengthened 1.5 per cent against the greenback. A rising yen spells bad news for Japanese manufacturers because it will make their exports look more expensive overseas.
In April, the Bank of Japan announced a massive stimulus in an attempt to get inflation up to two per cent. The euphoria that drove the Nikkei up to five-year highs followed by wild fluctuations. The index is now around 20 per cent down from its May 23 peak, leaving the market in bear market territory.
Commodity prices were lower as the World Bank lowered its global economic-growth forecast, saying it expects expansion of only 2.2 per cent this year, down from a 2.4 per cent projection issued in January.
In its semiannual Global Economic Prospects report, the World Bank also revised lower its expectations for growth in China, Brazil and India. At the same time, it upped growth estimates for Japan and the U.S.
The gold sector led TSX decliners, down 0.9 per cent as August bullion on the Nymex fell $14.50 to $1,377.50 (U.S.) an ounce. Barrick Gold Corp. faded 23 cents to $19.96 (Canadian).
The energy sector fell 0.66 per cent while the July crude contract on the New York Mercantile Exchange moved down 18 cents to $95.70 a barrel. Cenovus Energy shed 35 cents to $29.08.
The base metals sector inched up slightly as July copper lost two cents to US$3.20. Lundin Mining was down 16 cents to $4.14.
Outside of the resource sector, financials fell 0.45 per cent while Royal Bank shed 36 cents to $58.67.
The tech sector was supportive as BlackBerry climbed 35 cents to $14.22.
Elsewhere in Asia, the Hang Seng index fell 2.2 per cent while the Kospi in South Korea lost 1.4 per cent.
Mainland Chinese were pummelled as accumulating signs of a slowdown in growth in the world’s number-two economy caused investors to retreat. The Shanghai Composite Index slid 2.8 per cent to its lowest close in six months.
European bourses were in the red with London’s FTSE 100 index down 0.76 per cent, Frankfurt’s DAX fell 1.27 per cent and the Paris CAC 40 dropped 0.44 per cent.
On the corporate front, Empire Company Ltd. and its wholly-owned subsidiary, Sobeys Inc. announced Wednesday after the close that they are buying rival Canada Safeway Limited for $5.8-billion in cash. Empire shares jumped $7.79 or 11.52 per cent to $75.40.
BRP Inc., a Quebec-based maker of specialized off-road and highway vehicles, posted net income of $25.7-million, down from $54.6-million a year ago. Normalized net income, which adjusts for the impact of foreign exchange and other items, rose by 7.7 per cent to $53.4-million or 52 cents per share. Revenue climbed 5.5 per cent to $804.3-million and its shares were unchanged at $24.50.
Shares in Transat A.T. Inc. jumped 54 cents or 10.17 per cent to $5.85 as the travel company posted a net loss of $22.8-million or 59 cents per share in the quarter ended April 30. On an adjusted after-tax basis, Transat lost $1.43-million or four cents per share, which was far better than the 26 cents per share loss estimated by analysts and an improvement from a loss of 64 cents per share in the second quarter of 2012.