EU summit pessimism drags on markets
The European Union was once again the focus of investor sentiment on Monday, with worries that leaders attending a summit in Brussels would fail to reach a deal on Greek debt dragging down markets.
In Toronto, the benchmark S&P/TSX composite index dropped 30.08 points, or 0.24%, to 12,436.42. The 10 sub-indexes were equally split, with materials (down 1.08%) leading the decliners.
“Traders appear to have completely forgotten about the improving economic situation, particularly in the U.S. and have gone back to dwelling on the European debt crisis,” said analyst Colin Cieszynski of CMC Markets. Pointing out the impact “political posturing” was having on trading, Cieszynski said, “(Monday’s) theme has been questions over how much sovereignty are countries willing to give up to be part of the eurozone?”
German Chancellor Angela Merkel started the market slide when she said the aid program for Greece wouldn’t be finalized before the end of the summit because talks with banks were continuing, though French President Nicolas Sarkozy said he expected an accord within the next few days.
“This summit is destined to fail because they are talking about the wrong things,” Carl Weinberg, said chief economist and founder of High Frequency Economics. “They’re talking about a treaty for European fiscal integration, which will do a lot of good two or three years from now when it finally gets implemented. But it won’t help the current circumstances.”
Crude oil dipped US78¢ to US$98.78 a barrel in trading in New York, while gold slipped US$1.20 to US$1,731.00 an ounce.
The Canadian dollar, which closed within seven basis points of parity with the U.S. greenback on Friday, fell 21 basis points to US99.72¢.
There was little economic news to distract investors, and the data that was released in the U.S. was decidedly mixed. One report showed consumer spending declined in December, and while personal incomes rose in December, the 0.4% gain was short of the 0.5% analysts anticipated.
“The 0.1% decline in real consumer spending in December capped a year that began with promise (2.9% year-over-year in January) but ended with the slowest pace (1.4%) in almost two years,” said BMO Capital Markets economist Sal Guatieri, who noted that the personal savings rate also dropped in December due to an 0.8% year-over-year decline in disposable income per capita.
The Dow Jones industrial average erased earlier losses, declining 6.74 points, or 0.05%, to 12,653.72, and the Nasdaq slipped 4.61 points, or 0.16%, to 2,811.94.