CANADA STOCKS-TSX slumps as commodities, Fed minutes weigh

Wed Feb 20, 2013 4:54pm EST

* TSX falls 96.16 points, or 0.75 percent, to 12,714.05
    * Eight of 10 main index sectors decline
    * Materials group down 3.2 percent as commodity prices slip

    By John Tilak
    TORONTO, Feb 20 (Reuters) - Canada's main stock index
dropped sharply on Wednesday with weak commodity prices pulling
resource shares lower on worries that minutes from last month's
U.S. Federal Reserve meeting signaled the Fed may stop or slow
its stimulative bond-buying program.
    The index's losses were exacerbated by rumors that a
troubled hedge fund had been forced to liquidate positions,
triggering a commodities selloff.
    Also jarring stock markets on Wednesday was mixed U.S.
housing data. Figures showed groundbreakings for U.S. homes fell
in January but new permits for construction rose to a 4-1/2-year
high, reinforcing expectations the housing market will support
economic growth this year. 
    The minutes from the Federal Open Market Committee meeting
said that some officials voiced concern over the costs of
further asset purchases, although the tone was balanced somewhat
by a warning of the dangers of ending the bond-buying program
prematurely. 
    "Some of the hawkish comments out of the Federal Reserve
minutes are putting some pressure on the TSX, in particular the
gold sector," said Youssef Zohny, a portfolio manager at Stenner
Investment Partners, a unit of Richardson GMP.
    "The market has seen a decent rally over the past couple of
months, and a modest correction is probably overdue," he added.
    Strategists have said the Canadian stock market could be set
for a near-term pullback after a rally that took it to 18-month
highs, with resource shares especially vulnerable.
 
     The Toronto Stock Exchange's S&P/TSX composite index
 unofficially closed down 96.16 points, or 0.75
percent, at 12,714.05. Eight of the 10 main sectors on the index
were in the red.
    The materials sector, which includes mining stocks, fell 3.2
percent. Gold tumbled 2.7 percent, recording its biggest one-day
drop in nearly a year, after the Fed minutes became public.
Silver prices also dived. 
    "The question is whether they (commodity prices) are going
to bottom and start moving up," said Ian Nakamoto, director of
research at MacDougall, MacDougall & MacTier. He expects them to
rise in the second half of this year.
    The biggest decliners on the index were miners. Silver
Wheaton Corp dropped 6.5 percent to C$32.77. Barrick
Gold Corp fell 3.3 percent to C$30.81, and Goldcorp Inc
 fell 3.2 percent to C$32.96.
    The energy sector fell 0.7 percent amid the commodity
selloff. 
    Financials, the index's weightiest sector, were up 0.1
percent. Bank of Nova Scotia gained 1.5 percent to
C$60.01, and Toronto-Dominion Bank rose 0.5 percent to
C$84.28.
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