CANADA STOCKS-TSX nears 4-week low on Fed fears; turns negative for year

Wed Aug 7, 2013 5:22pm EDT

* TSX falls 56.59 points, or 0.45 percent, to 12,412.73
    * Seven of the 10 main index sectors decline
    * For the year, TSX is down 0.17 percent
    * Valeant, Air Canada jump after results
    * Athabasca gains after Dover oil sands project approval

    By John Tilak
    TORONTO, Aug 7 (Reuters) - Canada's main stock index tested
a four-week low on Wednesday as fresh concerns that the U.S.
Federal Reserve might soon begin pulling back on its monetary
stimulus program hit shares of financial and energy companies.
    The Toronto index, which extended its losses to a second
successive session, turned negative for the year. At Wednesday's
close, the index was down 0.17 percent for 2013. 
    Limiting the damage was a jump in the shares of Valeant
Pharmaceuticals International Inc after the drugmaker
issued an upbeat quarterly report and full-year forecast.
 The stock gained 2.1 percent to close at
C$101.70.
    A top Fed official said on Tuesday that the U.S. central
bank will likely reduce its bond buying later this year, and
depending on economic data, could do so as early as next month.
 
    Recent data from the United States has been showing greater
stability and growth in the world's largest economy, suggesting
to the market that a winding down of Fed stimulus could be
imminent.
    "Investors are becoming a bit more cautious on the potential
that there will be less Fed stimulus in the near term," said
Craig Fehr, Canadian market strategist at Edward Jones in St.
Louis, Missouri.
    "The economy is stable, potentially gaining a little bit of
momentum, but it's unlikely to hit its stride in the near term."
    Fehr said the market should look beyond the daily chatter
and realize that while a Fed pullback will ultimately happen,
the timing is less important.
    "The markets are attempting on a day-to-day basis to
pinpoint what the Fed is going to do and when they're going to
do it."
    The Toronto Stock Exchange's S&P/TSX composite index
 closed down 56.59 points, or 0.45 percent, at
12,412.73, after falling as low as 12,400.15, its lowest level
since July 11.
    Fergal Smith, managing market strategist at Action
Economics, said, "Our view is that they'll begin tapering in
September.
    "The stock market is setting up for that," he added. "For
Canada, you're starting to see some of the commodities roll over
in anticipation of September tapering."
    The worries about the timing of the Fed's move helped fuel a
decline in oil prices, which fell for a fourth straight session.
 
    Investors also assessed a decision by the Bank of England to
keep interest rates at a record low until unemployment falls to
7 percent or below, which it views as unlikely for another three
years. 
    Seven of the 10 main sectors in the index were in the red.
    Financials, the index's most heavily weighted sector, lost
0.7 percent. The stock of the Royal Bank of Canada, the
country's biggest lender, slid 1 percent to C$63.43 and had the
biggest negative influence on the TSX. Shares of
Toronto-Dominion Bank fell 0.9 percent to C$86.31.
    Energy shares dropped 0.8 percent, tracking the slide in the
price of oil. Enbridge Inc shed 1.6 percent to C$44.88,
and Suncor Energy Inc fell 0.7 percent to C$33.41.
    However, Athabasca Oil Corp jumped 10.2 percent to
C$8.12 after an Alberta energy regulatory panel approved the
company's Dover oil sands project. 
    Shares of Air Canada shot up 25 percent to C$2.65
after the country's largest airline reported a nearly three-fold
increase in second-quarter operating profit as margins improved.