The Toronto stock market was lower Wednesday as traders doubted the effect of measures by emerging market countries to protect their currencies while awaiting word from the U.S. Federal Reserve on whether it will further taper its bond purchases.
The S&P/TSX composite index dropped 61.56 points to 13,626.1, with losses limited by a rise in the gold sector as emerging market worries pushed bullion prices higher.
The Canadian dollar was up 0.05 of a cent to 89.69 cents (U.S.).
U.S. indexes were also in the red with the Dow Jones industrials off 100.5 points to 15,828.06, pressured in part by disappointing guidance from aircraft maker Boeing. Its shares fell almost five per cent.
The Nasdaq composite index lost 20.69 points to 4,077.27 and the S&P 500 index was down 8.62 points to 1,783.88.
Markets have been volatile since last week after Chinese data showed a contraction in manufacturing. And currencies in countries including India, Turkey, Russia and South Africa came under pressure as investors wondered how they’ll be affected by the U.S. Federal Reserve’s move to reduce its monetary stimulus.
Nerves were initially smoothed by the Turkish central bank’s aggressive interest rate hike to stabilize its currency, another rate hike in India and an injection of funds by China into its banking system.
The Turkish central bank move gave an initial boost to its currency. but confidence was shaken as the effect gradually faded. A surprise move by South Africa’s central bank also had only a short impact.
The Fed’s massive bond purchases over the last few years has resulted in a stream of cheap money into emerging markets, as investors looked for better returns, but U.S. rates are expected to rise as the central bank gradually cuts back on the stimulus.
“You’re seeing a lot of nervousness in this pullback but it’s not surprising to me,” said Sadiq Adatia, chief investment officer of Sun Life Global Investment, adding this episode is more of a “hiccup.”
“We know eventually bond yields are going to go up, and that will cause a bit more pressure on people’s interest rate borrowing costs.”
Meanwhile, the Fed was widely expected to announce later in the day that it will further cut its monthly purchase of bonds, a move that had kept long term rates low and encouraged a rally on stock markets.
The Fed has already tapered its asset purchases by $10-billion a month to $75-billion starting in January and is expected to announce it is trimming by a further $10-billion a month.
Meanwhile, Canadian Pacific Railway posted quarterly profit ex-items of $1.91 a share, missing estimates by two cents. Revenue rose seven per cent, also below estimates, but CP shares gained $4.85 to $163 on a positive outlook for its operating ratio.
The tech sector led TSX decliners, falling 1.55 per cent after CGI Group posted quarterly earnings ex-items of $207.9-million or 65 cents, five cents lower than estimates, and CGI shares fell $1.42 or four per cent to $33.81.
Elsewhere in the sector, shares in Yahoo fell 7.45 per cent after it reported that revenue dropped six per cent in the fourth quarter, the same rate of decline experienced for all of 2013.
The energy sector fell 0.8 per cent while the March crude oil contract on the New York Mercantile Exchange dropped 46 cents to $96.95 (U.S.) a barrel. Canadian Natural Resources fell 39 cents to C$35.91.
The base metals index gave back 0.2 per cent as the March copper contract dipped a cent to $3.25 (U.S.) a pound. First Quantum Minerals lost 32 cents to $20.04.
In the financial sector, worries about growth in emerging market countries pushed bank stocks lower as Scotiabank, the most international of the big Canadian banks, shed 64 cents to $61.24.
AGF Management Ltd. dropped 72 cents or 5.8 per cent to $11.69 after the investment firm posted earnings that fell short of expectations amid high restructuring costs in the fourth quarter.
The gold sector rose 2.2 per cent with the February gold contract up $13.40 to $1,264.20 (U.S.) an ounce. Goldcorp ran ahead 74 cents to $27.36 while Barrick Gold gained 75 cents to $21.71.
European bourses were negative with London’s FTSE 100 index down 0.7 per cent, Frankfurt’s DAX lost one per cent while the Paris CAC 40 fell 0.7 per cent.
- Boeing Co$122.56-1.05(-0.85%)
- Barrick Gold Corp$16.19+0.78(+5.06%)
- S&P/TSX Composite$12.76K-10.51(-0.08%)
- NASDAQ NMS COMPOSITE INDEX$4.36K-146.42(-3.25%)
- Dow Jones Industrials$16.20K-211.61(-1.29%)
- S&P 500 INDEX$1.88K-35.40(-1.85%)
- Gold Front Month Futures$1.17K+16.30(+1.41%)
- Updated February 5 4:00 PM EST. Delayed by at least 15 minutes.