CANADA STOCKS-TSX drops hard as commodity prices fall

Wed May 1, 2013 5:23pm EDT

Related Topics

* TSX falls 135.21 points, or 1.09 percent, to 12,321.29
    * Eight of 10 main index sectors decline
    * Talisman, Cameco decline after earnings reports
    * Yamana Gold falls 6.5 percent after profit drops
    * Tim Hortons jumps 4 percent after investor turns activist

    By John Tilak
    TORONTO, May 1 (Reuters) - Canada's main stock index fell
more than 1 percent on Wednesday, hurt by sluggish economic data
from China that yanked commodity prices lower and by weak
earnings reports from some of the country's biggest companies.
    Growth in the manufacturing sector in China, a big consumer
of commodities from Canada, slowed unexpectedly in April as new
export orders fell, raising fresh doubts about the strength of
that economy after a disappointing first quarter.
 
    The market also reacted nervously to the U.S. Federal
Reserve's move to keep buying $85 billion in bonds each month to
keep interest rates low and spur growth.
    Offsetting some of the weakness was a gain in shares of
coffee-shop chain Tim Hortons Inc after an activist
shareholder called for changes in the way the company is run,
and a rise in grocery-chain Loblaw Cos Ltd's stock after
the company reported first-quarter results. 
    The Toronto index, which recorded its second-biggest
percentage jump of the year thus far on Tuesday, gave up most of
those gains on Wednesday and slipped back into negative
territory for the year.
    "The Fed statement was fairly ambiguous for most investors,"
said Youssef Zohny, portfolio manager at Stenner Investment
Partners, a unit of Richardson GMP. "It seems like investors are
pretty disappointed."
    The Toronto Stock Exchange's S&P/TSX composite index
 closed down 135.21 points, or 1.09 percent, at
12,321.29. The TSX index is badly lagging the U.S. S&P 500
 index, which is up about 12 percent on the year. 
    "The TSX has some catching up to do with the global
markets," Zohny said. "There could be relative outperformance if
we see some stability in commodities and the economic data."
    Eight of the 10 main sectors on the index were in the red on
Wednesday, with the materials sector, which includes mining
stocks, declining 2 percent.
    Cameco Corp gave back 0.5 percent after the uranium
producer siad its profit plunged 93 percent in the first quarter
as uranium sales fell and prices were weaker. 
    Miner Yamana Gold Inc fell 6.5 percent to C$11.66
after it reported a 40 percent drop in first-quarter profit late
on Tuesday, hurt by lower gold prices and higher costs.
 
    "Their results were lousy," John Ing, president of Maison
Placements Canada, said of Yamana's first-quarter performance.
"Higher costs were definitely a factor, but they were
disappointing."
    Ing said the lower bullion price was hurting gold miners,
which have lost about 35 percent of their market value since the
start of the year. The price of bullion fell more than 1 percent
on Wednesday, hit by holidays in China and parts of Europe,
which slowed gold buying. 
    Energy shares gave back 2 percent as oil prices slipped.
 Among them, Suncor Energy Inc shed 2.7 percent and
played the biggest role of any single stock in leading the index
lower.
    Talisman Energy Inc's shares fell 4.8 percent after
the oil and gas company posted a quarterly loss as the sale of
some North Sea assets hurt production. 
    Financials, the index's weightiest sector, declined 0.5
percent. 
    Tim Hortons is facing pressure from a U.S. hedge fund to 
boost returns aggressively through debt-funded share buybacks
and a scaling back of U.S. expansion plans, according to
documents seen by Reuters and two sources familiar with the
matter. Tim Hortons stock rose 4 percent to
C$56.77.
    Shares of Loblaw jumped 4.7 percent to C$44.75 after it
reported a 40 percent increase in first-quarter profit and said
it plans to compete an initial public offering of its real
estate investment trust in early to mid-July.
FILED UNDER: