TSX lower as eurozone recession deepens
A Toronto Stock Exchange ticker is seen at The Exchange Tower in Toronto. (Aaron Vincent Elkaim / THE CANADIAN PRESS)
Published Thursday, February 14, 2013 8:22AM EST
Last Updated Thursday, February 14, 2013 4:47PM EST
TORONTO -- The Toronto stock market closed lower Thursday as energy stocks backed off amid data that showed worsening economic conditions in Europe and earnings disappointments.
The S&P/TSX composite index fell 53.49 points to 12,721.79 while the TSX Venture Exchange was down 7.72 points to 1,196.56.
The Canadian dollar was ahead 0.06 of a cent at 99.88 cents US.
U.S. indexes were mixed after Eurostat, the EU's statistics office, said the eurozone economy shrank by 0.6 per cent in the final quarter of 2012 from the previous three-month period. The decline was bigger than the 0.4 per cent drop expected by markets and represented the biggest fall since the first quarter of 2009 when the global economy was in its deepest recession since the Second World War.
The Dow Jones industrials was off 9.52 points to 13,973.39 , the Nasdaq composite index was up 1.78 points to 3,198.66 and the S&P 500 was up 1.05 points to 1,521.38.
The eurozone has now contracted for three straight quarters, weighed down by weak, debt-laden countries such as Greece and Spain, where governments have been aggressively increasing taxes and cutting spending.
Especially worrisome was worsening conditions in Europe's biggest economy. The German economy shrank by a quarterly rate of 0.6 per cent in the fourth quarter as demand for its exports fell.
"About a year ago... Germany looked pretty strong but what I was saying at that time was that, eventually the impacts of the rest of the eurozone will also hurt Germany at some point. And we're seeing evidence of that," said Sadiq Adatia, chief investment officer at Sun Life Financial.
On a positive note, he added that the worsening economic conditions could persuade Germany to do more to help their heavily-indebted neighbours.
"Or on the other hand, they may say, we don't have any more money to help out because we need to help our own economy."
There was also major acquisition activity in the U.S. Warren Buffet's Berkshire Hathaway and investment company 3G are buying food giant Heinz in a deal valued at $23.3 billion, excluding debt. Heinz shareholders will receive $72.50 in cash for each share of common stock they own, a 20 per cent premium to Heinz's closing price of $60.48 on Wednesday.
The energy sector led decliners, down 1.6 per cent while the March crude contract on the New York Mercantile Exchange gained 30 cents to US$97.31 a barrel.
Cenovus Energy (TSX:CVE) posted a net loss of C$118 million or 16 cents per share, a big turnaround from the year-earlier profit of $266 million or 35 cents per share. Cash flow fell to $697 million or 92 cents per share, down from $851 million or $1.12 per share. Cenovus shares declined 81 cents to $31.79.
Gas giant Encana Corp. (TSX:ECA) reported a fourth-quarter loss of $80 million, an improvement over a shortfall of $476 million a year ago. Encana expects its oil and natural gas production in 2013 to be between 50,000 to 60,000 barrels per day and capital investment to be about $3 billion to $3.2 billion. But that's below an earlier forecast of 60,000 to 70,000 bpd. And its previous target for capital investment had been $4 to $5 billion and its shares fell $1.28 or 6.57 per cent to $18.20.
Utilities also contributed to the poor TSX showing as Just Energy Group (TSX:JE) dropped 71 cents or 8.47 per cent to $7.67. The stock has been under pressure since last Friday, with its stock plunging 13 per cent that day after the natural gas and electricity retailer slashed its dividend, missed analyst revenue expectations, and announced that it wants to put in place a shareholder rights plan.
The tech sector was the leading sector, about 1.25 per cent with BlackBerry (TSX:BB) up $1.05 or 7.5 per cent to C$15.05, a day after dropping more than eight per cent as the sheen continued to wear off from the company's smartphone product launch two weeks ago. Shares had been negative earlier in the session when it was revealed that former CEO James Balsillie no longer owns a stake in the company.
The rest of the sector was mixed with Constellation Software (TSX:CSU) down $3.54 or 2.94 per cent to $117.
The gold sector was up about 0.4 per cent as April bullion surrendered early gains and moved down $9.60 to US$1,635.50 an ounce, its lowest close since Aug. 20.
Barrick Gold Corp. (TSX:ABX) is cutting or delaying US$4 billion in previously budgeted capital spending and writing down the value of its copper business unit by US$4.2 billion after taxes. Toronto-based Barrick made the announcement as it posted a $3.06-billion net loss in the fourth quarter and its shares gained 72 cents to C$32.44.
Kinross Gold Corp. (TSX:K) reported a quarterly net loss of $2.99 billion, or $2.62 per share, compared with a net loss of $2.79 billion, or $2.45 per share in the year-earlier period. On an adjusted basis, Kinross reported net earnings of $276.5 million, or 24 cents per share, which beat analyst estimates by a penny and its shares gained 43 cents to C$8.34.
The base metals sector was ahead 0.11 per cent while copper for March delivery on the Nymex was unchanged at US$3.74 a pound. Turquoise Hill Resources (TSX:TRQ) gave back 13 cents to C$7.40.
In other earnings news, Sun Life Financial (TSX:SLF) reported after markets closed Wednesday that its quarterly earnings were $395 million, or 65 cents per share, compared with a loss of $525 million, or 90 cents per share, a year ago. Operating earnings, which excludes items that the company believes are not ongoing, came in at 76 cents per share, outdoing analyst expectations of 63 cents per share, according to a poll by Thomson Reuters. Its shares were down $1.14 to $28.86.
In the U.S., General Motors said it made US$898 million or 54 cents a share in the latest quarter, up from $468 million in 2011. The fourth-quarter profit included billions in one-time accounting gains and losses in which the company came out $100 million ahead. Without it the company earned 48 cents per share. That was short of analyst estimates of 51 cents and GM stock declined 92 cents to $27.75.