Toronto stock market translates Moody's bank downgrade into a positive
Published Friday, June 22, 2012 10:06AM EDT
Last Updated Friday, June 22, 2012 4:43PM EDT
The Toronto stock market was slightly positive in afternoon trading on Friday as traders found a silver lining to Moody's downgrade of some of the world's biggest banks, including Canada's largest.
The S&P/TSX was up 18.66 points to 11,426.98 rebounding from a 350 point loss Thursday, the biggest one-day drop of the year.
The TSX Venture Exchange lost 16.96 points to 1,200.39.
The Canadian dollar gained 0.45 of a cent to 97.60 cents US, after a report showed the country's inflation rate dropped to its lowest level in nearly two years.
One of the biggest gainers on the TSX was the financial sector, which rose 0.8 per cent, despite Moody's Investors Service having moved to cut the credit ratings of 15 of the world's largest banks, including Barclays, Deutsche Bank and Royal Bank (TSX:RY).
The ratings agency's comments appeared to clear the air on some uncertainties about banks with large capital markets exposure. Some of those worries had been built into stock prices months ago when Moody's announced that it had launched the review. Shares in Royal Bank --a heavyweight on the TSX -- were up 75 cents to $52.08.
Leading the decliners was the gold sector, which was down 1.1 per cent as August gold lost $4.50 at US$1,570.00 an ounce on the New York Mercantile Exchange after losing $50 Thursday.
Shares of Centerra Gold (TSX:CG) plunged 28 per cent as legislators in Kyrgyzstan debated whether to strip the company of its licence to mine a major gold field in the Central Asian country, with some accusing it of damaging the environment and profiting excessively. The company's stock was down $3.32 at $8.46.
Materials stocks were also weaker, off 0.9 per cent, with Ivanhoe Mines (TSX:IVN) falling 16 cents to $11.99.
On Wall Street, the Dow Jones average was up 74.29 points to 12,647.86, the Nasdaq rose 27.60 points to 2,886.69 and the S&P 500 gained 9.61 points to 1,335.12.
The August crude contract on the New York Mercantile Exchange was up $1.78 at US$79.98 a barrel.
Statistics Canada said inflation fell to 1.2 per cent last month as Canadians paid less for gasoline, video equipment and some types of clothing, while price gains in many other consumer goods moderated.
Canadian Pacific Railway Ltd. (TSX:CP) said it has a multi-year agreement with U.S. Silica to transport frac sand, but declined to disclose the value of the contract. The operator will be the exclusive rail service provider to the American company's newest mining and processing facility in Sparta, Wis. Shares of Canadian Pacific were down 42 cents at $73.83.
On Thursday, the TSX plummeted three per cent, closing more than 350 points lower in its biggest one-day drop since November. Much of the pull was from resource stocks and tanking commodity prices.
European and Asian stocks fell Friday after economic reports suggested growth will weaken in the world's major economies. Downbeat data on Germany, China and the U.S. came on top of uncertainty over whether European leaders will make progress in tackling their debt crisis at key meetings.
Germany's Ifo institute reported that business optimism fell for a second straight month in Europe's largest economy, which has been growing more strongly than the 17-member eurozone as a whole. The survey index dipped to 105.3 from 106.9 in May.
That followed a U.S. Labor Department report Thursday that the four-week average of applications for unemployment benefits jumped to the highest level in nine months. Appetite for financial assets such as stocks was also dented by the results of a monthly HSBC survey, which showed that manufacturing in China has continued to contract.
China's growth has been a pillar of the global economy in recent years, so its slowdown has been of particular concern to investors.