TSX GAINS AS BULLION HITS SIX-MONTH HIGH
TORONTO • The Toronto stock market racked up a modest gain Wednesday, supported by gold stocks as investors looking for a safe haven pushed bullion to a sixmonth high.
The S&P/TSX composite index gained 51.77 points to 14,319 with gains limited by energy and base metal stocks that fell amid worries about Chinese growth.
The commodity-sensitive Canadian dollar was down 0.11 of a cent to US89.96¢.
U.S. indexes were mixed as the Dow Jones industrials lost 11.17 points to 16,340.08, the Nasdaq was up 16.14 points at 4,323.33 and the S&P 500 index edged up 0.57 of a point to 1,868.2.
The gold sector was the prime TSX advancer, up about 3% as worries about China, along with Ukraine tensions, pushed bullion prices higher with the May contract ahead $23.80 to US$1,370.30 an ounce.
The U.S. Senate has prepared legislation that would impose economic penalties on Russian officials complicit in Ukrainian corruption or anyone responsible for Moscow’s military takeover of Ukraine’s Crimean peninsula. The latest worries about China took root after data released over the weekend showed that the world’s secondbiggest economy experienced an 18% drop in exports in February.
Copper, viewed as an economic barometer as it is used in so many applications, has tumbled in recent days to the lowest level since mid-2010, having fallen 8.3% over the previous three sessions.
But copper demand concerns are only part of the problem.
“Fears following the first onshore credit default have led to speculation that further defaults may unlock copper from financing deals and fuel further selling,” said a commentary from Barclays Research.
Chinese authorities gave the go-ahead late last week for the country’s first credit default, involving a manufacturer of solar panels. And another solar energy company is also in danger of default.
This is worrisome because copper is used as much for financing transactions as for its industrial applications.
Traders worry that a wave of defaults could result in a massive liquidation of copper on the markets, which would further depress prices.
The TSX base metals sector was down 0.47% as the May copper contract on the New York Mercantile Exchange shed early losses and climbed a penny to US$2.96 a pound after falling as low as $2.91 a pound.
But some analysts think the reaction to the China news has been overdone.
“Somewhere along the way, [China] has to slow down a little bit,” said Fred Ketchen, a manager of equity trading at ScotiaMcLeod.
The energy sector shed 0.27% as demand concerns have steadily pushed oil prices lower this week and the April contract in New York was down another $2.04 to US$97.99 a barrel after losing about $2.50 over the previous two sessions.
In the U.S., shares in nutritional supplement company Herbalife dropped 7.37¢ to US$60.57 after the Federal Trade Commission opened an investigation into the company. Word of the investigation came a day after hedge fund manager William Ackman renewed his attacks on the company.