Mining stocks push TSX lower - Financial Post

TORONTO ? The Toronto stock market registered a triple-digit tumble Wednesday morning as investors feared that a failure to resolve the looming American ?fiscal cliff? crisis will send the U.S. into recession and pull down other economies.

Such a scenario is bad news for a resource-heavy market like Toronto?s as slowing economies in other countries will slash demand for oil and metals and pressure mining and energy stocks.

The S&P/TSX composite index dropped 115.58 points 12,023.31 with losses spread across most sectors, while the TSX Venture Exchange fell 20.65 points to 1,266.24.

The Canadian dollar lost 0.09 of a cent to 99.72 cents US.

U.S. indexes were lower despite a strong earnings report from tech bellwether Cisco Systems and retailer Abercrombie & Fitch.

The Dow Jones industrials slipped 77.25 points to 12,678.93, the Nasdaq dropped 9.97 points to 2,873.92 while the S&P 500 index backed off 6.4 points to 1,368.13.

Cisco Systems Inc. shares surged over six% after the world?s largest maker of computer networking gear said that its earnings rose 18% in the latest quarter to US$2.1-billion or 39 cents a share.

Cisco?s growth was propelled by a renewed willingness by large U.S. businesses to invest in big-ticket networking gear, as orders from large business customers in the U.S. rose nine% from a year ago, helping to make up for continued weakness in Europe.

Stock markets have registered a series of losses over the last week after the results of the U.S. election essentially left the political landscape unchanged ? and amid heightened pessimism that lawmakers can come together and arrange a compromise to avoid a so-called fiscal cliff at the start of the year.

That?s when a series of tax cuts from the Bush-era expire, which would raise tax bills for almost all Americans. As well, huge spending cuts are automatically set to take effect, which would take a huge chunk out of U.S. gross domestic product and likely push the economy back into recession, taking other countries? economies with it.

President Barack Obama said Wednesday the economy cannot afford a tax increase on all Americans and President Barack Obama said Wednesday that the U.S. can?t afford plunging into tax increases at the start of the year. And he called on congressional Republicans to support an extension of existing tax rates for households earning US$250,000 or less.

Losses have been especially severe on U.S. markets this past week with selling across all sectors because investors are worried they will be paying substantially higher dividend and capital gains taxes in the new year.

?That?s what?s driving a lot of it these days ? taxes are bound to go up,? said John Tsagarelis, managing director and senior portfolio manager at Manulife Asset Management.

?It may not be the full effect that is the doomsday scenario, but at the margin, I think taxes will go up.?

The gold sector led TSX decliners, down 2.35% with December bullion up $5.30 to US$1,730.10 an ounce.

Iamgold Corp. tumbled 17.61% to $12.26 after the miner reported a 10% drop in revenue to $386.8 million in the latest quarter. Net earnings ran up 56% to $78-million. Ex-items, earnings came in at 60.2 million, or 16 cents a share, down from $112.4-million a year ago. Analysts had called for adjusted earnings per share of 24 cents on $427-million in revenue.

?Gold prices at $1,730 are roughly flat for the year but cost pressures continue to go up for resource companies so that?s taking the shine off that sector for sure,?added Tsagarelis.

Elsewhere in the sector, Goldcorp Inc. lost 89 cents to $42.04.

The base metals sector was down 1.1% with December copper down two cents at US$3.46 a pound. Rio Alto Mining lost 29 cents to $5.44 while Taseko Mines shed 11 cents to $2.71.

The energy sector was off 0.47% as December crude on the New York Mercantile Exchange rose $1.01 to US$86.39 a barrel. Suncor Energy declined 34 cents to $32.21.

Industrial stocks were also weak and shares in Bombardier Inc. fell six cents to $3.24 after the S&P ratings agency lowered its long-term corporate rating one notch to ?BB? from ?BB+? with a stable outlook. S&P cited Bombardier?s ?significantly lower-than-expected? cash generation this year as customer advances and operating profit fell amid the weak global economy. Fitch Ratings recently did the same and Moody?s shifted its outlook on the company from stable to negative and lowered its liquidity rating, citing similar reasons.

The consumer staples sector was higher amid positive earnings reports from the country?s biggest grocers.

Loblaw Companies Ltd. shares ran up 68 cents to $34.03 as the company increased its quarterly dividend by nearly five%. The retailer also said net income fell by 5.9% to $222 million or 79 cents per share, however, due to several items excluded from the adjusted earnings.

Metro Inc. reported its quarterly net income was up 75.9% compared with the same time last year, rising to $145.1-million or $1.46 per share. Metro?s overall sales were up 11.1% to $2.9 billion, while same-store sales from locations open at least a year were up 1.1%. Its shares ticked 84 cents higher to $59.42.

Another strong gainer on the TSX was home improvement chain Rona Inc.. Its stock rose 52 cents or 4.74% to $11.50 after fund manager Invesco Canada, which controls about one-tenth of the company?s stock, called for shareholders to remove Rona?s board of directors and install new directors.

The Canadian Press

Source: http://business.financialpost.com/2012/11/14/mining-stocks-push-tsx-lower/

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