Eu deflation fears tamp down markets
• The Toronto stock market closed in the red on the final day of January trading on Friday as worries about European deflation and currency troubles in emerging markets persuaded investors to step back after a big run-up.
However, markets were well off earlier lows as the S&P/TSX composite index dropped 40.34 points to 13,694.94.
The Canadian dollar advanced US0.22¢ to US89.78¢ as November gross domestic product rose 0.2%, in line with forecasts.
New York’s Dow industrial average dropped 149.76 points to 15,698.85, Nasdaq slipped 19.25 points to 4,103.88 and the S&P 500 index lost 11.60 points to 1,782.59.
Data showed that inflation in the eurozone fell to 0.7% in the 12 months to January from 0.8% the previous month.
The data raised worries that the region could slip into a situation where prices are actually falling. Such deflation can hurt an economy as consumers delay purchases and businesses postpone investment.
The deflation concerns added to emerging market currency worries that have buffeted markets this past week.
The TSX is up 0.53% for the month and the Dow is down 5.3%. But analysts suggested that a reason for the decline is that investors simply wanted to cash in on a huge rally last year that left the Dow up well over 20%.
“This is more like taking profits,” said Sid Mokhtari, a technical analyst at CIBC World Markets, noting that the U.S. market has only fallen 4% this month peak to trough.
“Internals of the market are still OK,” he said. “We don’t see too many damaged profiles to the market internals, which is generally a good sign.”
Meanwhile, TransCanada Corp. shares gained 59¢ to $48.42 after an environmental report from the U.S. State Department said the company’s controversial Keystone XL pipeline is unlikely to significantly affect the rate of extraction in the Alberta oil sands. The report stops short of recommending approval of the pipeline, but gives President Barack Obama political cover if he chooses to endorse the pipeline in spite of opposition.
TSX losses were paced by a 1.65% fall in the base metals sector as March copper in New York lost US3¢ to US$3.19 a pound.
Uranium miner Cameco Corp. is selling its share of the Bruce Power nuclear partnership in southwestern Ontario to Borealis Infrastructure for $450-million. Cameco shares were down 91¢ to $23.67. Financials also weighed, down 0.93%. The gold sector slipped about 0.4% as gold gave back US$2.10 to US$1,240.10 an ounce.
The industrials group was slightly lower after Canadian National Railway Co. missed quarterly earnings estimates by a penny a share as results were affected by tough winter conditions. CN shares gained 27¢ to $59.61 as the railway upped its quarterly dividend by 16% to 25¢ and RBC Capital Markets raised its rating to outperform.
The energy sector rose 0.25% as March crude lost US74¢ to US$97.49 a barrel.
In the U.S., Amazon.com Inc. stock fell 11% as the retailer handed in results that missed earnings and revenue forecasts.