The Toronto stock market headed lower Monday amid news that Ottawa will be setting aside the majority of the spectrum in a new wireless auction for newer, smaller cellphone companies.
The S&P/TSX composite index lost 97.01 points to 15,117.95, weighed down by declining telecom stocks.
Industry Minister James Moore said most of the AWS-3 spectrum auction next year will only be available to telecom companies that emerged after 2008, such as Wind Mobile and Mobilicity. The move is part of the government’s efforts to lower the prices of wireless plans and will be in addition to the auction of 2,500 megahertz spectrum that’s already scheduled for April 2015.
Shares in the big three telecom giants all reacted negatively. Shares in BCE Inc. dropped 35 cents to $48.17, Rogers Communications fell 82 cents to $42.20, while Telus Corp. dipped 98 cents to $38.95. The telecom sector was the leading decliner on the TSX, down by about 1.42 per cent in midday trading.
Meanwhile, the Canadian dollar was flat after strengthening last week. It was down 0.08 of a cent to 93.76 cents (U.S.).
The Bank of Canada says management at 100 Canadian firms remain upbeat about future prospects and the economy, although the level of enthusiasm appears to have dropped off somewhat. The central bank’s latest business outlook survey shows executives giving generally positive responses across a number of questions, from expectations on sales activity, hiring intentions and investment plans. But in most cases, confidence levels dropped from the spring survey, which suggested firms were gearing up for stronger economy.
Overnight, the chief of the International Monetary Fund forecasted that the global economy will improve over the next 18 months but says growth might not be as fast as previously expected.
IMF Managing Director Christine Lagarde said that investment remains weak and that the recovery in the United States hinges on the ability of the Federal Reserve to gradually reduce stimulus measures and on political leaders agreeing on a fiscal plan. The IMF is expected to update its economic forecasts later this month. In April, it predicted global growth of 3.6 per cent this year and 3.9 per cent in 2015, up from 3 per cent last year.
U.S. markets were down with the Dow Jones industrials losing 63.88 points to 17,004.38, the Nasdaq dropping 25.22 points to 4,460.71, while the S&P 500 dipped 8.09 points to 1,977.35. Wall Street had been closed since midday Thursday for the Independence Day holiday.
Traders will look for hints this week for the pace of future interest rate hikes as the U.S. Federal Reserve releases the minutes of its latest meeting on Wednesday. They will also be looking for corporate results from U.S. resource company Alcoa Inc., which will be kicking off the second-quarter earnings season Tuesday. Alcoa is viewed as an economic bellwether because its aluminum products are used in so many applications.
“The markets might tread water for a bit,” said Ian Nakamoto, director of research at 3MACS.
“Everyone keeps talking about some sort of pullback but it doesn’t seem to happen. Coming into earnings season, there might be a more meaningful sell-off but the bar is still set very low for earnings expectations.”
In commodities, oil fell below $104 per barrel as expectations of increased supply offset strong U.S. job growth. Oil has been sliding since it reached a 10-month closing high of $107.26 on June 20 due to concern about an advance by Islamic militants in controlling Iraqi territory. Since then, it has become clear that there are no imminent disruptions to supplies from Iraq, the second-biggest producer for the Organization of the Petroleum Exporting Countries (OPEC).
On the commodity markets, the August crude contract was down 63 cents to $103.43 (U.S.) a barrel, while August bullion was down $5.40 to $1,315.20 an ounce. August copper was $3.25 a pound, falling by two cents.