CANADA STOCKS-Fed fears yank TSX to biggest drop in 5-1/2 months

Wed Dec 11, 2013 5:03pm EST

* TSX falls 190.59 points, or 1.43 percent, to 13,133.42
    * All 10 of the main index sectors decline
    * CN Rail's drop has biggest negative impact on index
    * Encana slips after releasing production forecast

    By John Tilak
    TORONTO, Dec 11 (Reuters) - Canada's main stock index
recorded its biggest single-day drop in about 5-1/2 months on
Wednesday after a provisional U.S. budget agreement raised fears
the U.S. Federal Reserve might soon begin to scale back its
monetary stimulus program.
    After three days of gains, the Toronto stock market's
benchmark index fell to its lowest level in about seven weeks,
with every major sector ending in negative territory.
    Adding impetus to the index's dive was a 5.6 percent decline
in shares of Encana Corp after the company released its
2014 production outlook, predicting lower-than-expected output
of high-value natural gas liquids and oil. Falling natural gas
prices contributed to the decline. 
    The bipartisan budget deal announced in the U.S. Congress on
Tuesday marked the end of three years of gridlock and fiscal
instability in Washington that culminated in October with a
partial government shutdown. 
    But some investors were skeptical about the deal, and said
the market had already factored any positive effects.
    "All they are doing is kicking the can down the road," said
Gavin Graham, chief strategy officer at Integris Pension
Management Corp.
    He added that while it is possible the fiscal deal might
result in the Fed stepping back from bond-buying if there is
evidence the agreement will lead to a genuine longer-term
reduction in spending and taxes, he wasn't counting on it.
    The Toronto Stock Exchange's S&P/TSX composite index
 closed down 190.59 points, or 1.43 percent, at
13,133.42.
    Graham said he is bullish on index's prospects next year as
he sees sentiment for commodities improving. "Canada actually
does better than the United States for the first time in four
years," he said.
    The index's energy group, down 1.6 percent, was hit by a
drop in the price of U.S. crude oil. In the sector, Suncor
Energy Inc shed 1.5 percent to C$35.51, and Canadian
Natural Resources Ltd gave back 0.8 percent to C$34.49.
    The materials sector, which includes mining stocks, was down
2.4 percent. Barrick Gold Corp lost 3.5 percent to
C$17.29, and Teck Resources Ltd declined 3.4 percent
to C$24.67.
    Shares of banks and insurers gave back 1.2 percent. Royal
Bank of Canada, the country's No. 1 lender, fell 1.3
percent to C$68.45. Manulife Financial Corp shed 2.2
percent to C$19.69.
    Canadian National Railway Co, the country's largest
rail operator, dropped 3.2 percent to C$57.65 and was the
biggest contributor to the index's decline.
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